The risk of a carbon ‘bubble’

Don’t worry about all the world’s fossil fuels running out. The graphic above suggests that we can’t run the risk of burning all the fuel that we know we have anyway! But if that’s true, then what are all those fossil fuel reserves worth?According to the Guardian, the concept of a “carbon bubble” has gained rapid recognition since 2013, and is being taken increasingly seriously by some major financial companies. The concern is that if the world’s governments meet their agreed target of limiting global warming to 2C by cutting carbon emissions, then about two-thirds of proven coal, oil and gas reserves cannot be burned. With fossil fuel companies being among the largest in the world, sharp losses in their value could prompt a stock market crash and a new economic crisis.

The Guardian says that the Bank of England is to conduct an enquiry into the risk of fossil fuel companies causing a major economic crash if future climate change rules render their coal, oil and gas assets worthless.

The UN’s Intergovernmental Panel on Climate Change recently warned that the limit of carbon emissions consistent with 2C of warming was approaching and that renewable energy must be at least tripled. E.ON announced it was to hive off its fossil fuel business to focus on renewables and networks. “Policy makers and now central banks are waking up to the fact that much of the world’s oil, coal and gas reserves will have to remain in the ground unless carbon capture and storage technologies can be developed more rapidly,” according to one MP. “It’s time investors recognised this as well and factored political action on climate change into their decisions on fossil fuel investments”.