‘Unburnable’ fossil fuels set to leave investors stranded (reprint)

Work still busy – article of interest. 

By James Whitmore, The Conversation

Investors are continuing to pour money into fossil fuel reserves that could end up being worthless due to efforts to combat climate change, a new report has found.

The Climate Tracker report found that investors are set to waste US$6 trillion on fossil fuel reserves in the next ten years if they fail to account for global carbon budgets.

To keep climate change under the globally agreed-upon figure of 2°C by 2050, emissions must be kept to under 900 gigatonnes (Gt) CO2, the report says.

If the budget is allocated according to how much each source (fossil fuels, housing, transport etc) contributes to emissions, investment in fossil fuels must be limited to the equivalent 125-225 Gt CO2 until 2050.

Last year companies invested US$674b in developing new fossil fuel reserves. Under the new budget scenario 60-80% of this investment in fossil fuel reserves will be wasted.

Globally 200 publicly listed companies currently invest in the equivalent of 762Gt CO2. There are further interests in undeveloped reserves which could double the size to 1,541Gt CO2.

Professor Tony Wood at University of Melbourne said there’s a disconnect between what’s necessary to avoid the worst aspects of climate change, and what’s actually happening, and “this report has put that disconnect into numbers.”

Businesses continue to invest in these “stranded” assets because of continuing uncertainty over carbon pricing, he said.
“Governments around the world have moved away from discussing climate change in a policy sense.”

Energy economist Dr. Barry Naughten at Australian National University said investors don’t believe governments will put a high enough price on CO2 emissions to cause them a problem.

“In Australia there’s a lot of confusion as to whether the carbon price will be maintained in any shape or form if there’s a change of government this year,” he said.

The new carbon budget is higher than previous assessments because it assumes efforts to reduce non-CO2 emissions from waste and agriculture, such as methane, will increase.

Professor Wood said there were signs of hope that emissions from waste and agriculture could be reduced.

The report reveals Australian companies have interests in 26Gt CO2, including 1Gt CO2 in gas, 2Gt CO2 in oil, and 23Gt CO2 in coal.

The highest investment is via the New York Stock Exchange with 215Gt CO2. The majority of this is invested in oil. Companies listed in London have interests in 113Gt CO2, with a greater proportion devoted to coal.

After 2050 carbon budgets must remain very low, with only 75Gt CO2 allowed in order to keep warming below 2°C.

The Conversation

This article was originally published at The Conversation.
Read the original article.

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13 thoughts on “‘Unburnable’ fossil fuels set to leave investors stranded (reprint)

  1. HEEEE HAAWW

    If only you could stop those nasty capitalists pulling out their money when you scare them with higher energy prices

    This inane bleating will be regurgitated when enough people go off-grid/self-sufficient too.

  2. BBD says:

    For a spread of opinion – WMC/Stoat thinks this is over-played and I am somewhat inclined to agree.

    • Nick says:

      Not exactly comforting being right about that.

      It’s only overplayed because the big interests dictate policy on energy,not governments,which have so far decided they can only tinker around the edges via incentives and tariffs with renewables. Governments will always roll over,having in many cases sold off public FF infrastructure with sweeteners and the implicit promise that FF is BAU…and the crazy fundamental acceptance that economies that run on planned obsolescence are not now fundamentally crazy.

      So there is no carbon bubble because it is not acceptable due to privilege,incumbency and undertakings,despite physics.

      A carbon pricing scheme of some scale is desperately needed.

      • Eric Worrall says:

        If only you could stop those nasty capitalists pulling out their money when you scare them with higher energy prices and hostile regulation…

      • Nick says:

        In a nutshell,Eric. The few who command much of the cash will hold the many to ransom,demanding the economy that they want…..and despite the best,broadest and most broadly useful intellectual capital residing elsewhere. The primacy of narrow capitalist dictates over the knowledge they helped build. Is that the world you cheer for?

        Sorry,we don’t have time and space for this any more. No more carpets to hide the damage under,despite tax havens to secret away the cash. The bread-heads chose a recipe for disruptive social change and civil strife,having learned essentially nothing from centuries of similar pain.

  3. Eric Worrall says:

    All we’ve had to do to date, to whip politicians back into line, is sack a few people, throw a few scares about jobs, and run a few ads.

    There is no reason to think that strategy cannot continue indefinitely.

    • Nick says:

      Eric,you are right…because the lunatics are running the asylum.

      • Stuart Mathieson says:

        I agree. If EW is typical of “the right wing” as he seems won’t to proclaim, no wonder the West is limping from one economic disaster to the next.

    • BBD says:

      Physics.

    • Steve says:

      Stuart, Eric is not typical of the right wing.
      He is more intelligent than the majority of right wingers. It is even possible for him to modify his opinion with further evidence from climatic data in the future.
      The problem is not people like Eric, but the totally inflexible ones.
      As Nick says, the lunatics are running the asylum.

  4. Here the major responsibility for this investing disaster lies with the politicians . It is only prudent for investors taking the long view to hedge their bets, short of firm statements from government leaders that we will meet 2050 CO2 levels by cutting fossil fuel use.

    • Eric Worrall says:

      Having worked with merchant bankers for around a decade, my experience is investors rarely notice politicians. Most of them are PHD physics and math grads from top university, thinking up ways to circumvent tiresome restrictions on their money making is something they sometimes do over their morning latte.

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