An Earth Day Debate: Is There a ‘Carbon Bubble’?
The Hague — Today many are celebrating Earth Day by admiring the beauty of our planet and by calling attention to the environmental dangers it faces.
While the focus is on the planet, economists are warning that carbon emissions could cause grave damage to something else green and dear.
The value of carbon-based investments — many traded publicly — could implode once governments start seriously curbing emissions, bursting what some have dubbed “the carbon bubble.”
A report released by the Carbon Tracker Initiative and the London School of Economics on Friday, shows that 60 to 80 percent of coal, oil and gas reserves held by the top 200 oil and gas and mining companies listed on the world’s stock exchanges could be considered unburnable and therefore far less valuable than thought.
“Smart investors can already see that most fossil fuel reserves are essentially unburnable because of the need to reduce emissions in line with the global agreement by governments to avoid global warming of more than 2°C,” said Professor Lord Stern of Brentford, Chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.
But if current trends continue, a further $6 trillion will be spent developing fossil fuels in the next decade, while the world’s global carbon budget — the amount of carbon it is safe to burn — remains limited and fixed.
The authors of Unburnable Carbon 2013: Wasted capital and stranded assets propose that a carbon budget of 900 gigatonnes of CO2 in the atmosphere from now to mid century would give an 80 percent chance of 2 degree warming. And unless carbon capture and storage technology changes drastically, say the researchers, its use will not cause the planet’s carbon budget to change significantly.
The researchers found that the top oil and gas and mining companies are already sitting on $4 trillion of fossil fuel. And though much of the reserves cannot be used if global warming measures are enacted, the markets continue to value the dirty energy assets.
Last year alone the companies invested $674 billion in fossil fuel reserves exploration, some of which was undertaken in environmentally sensitive areas.
This interactive map shows where energy reserves are traded around the world.
“Pretending business models reliant on more carbon emissions fit with increasing carbon constraints is the equivalent of the emperor’s new clothes,” said James Leaton the research director at Carbon Tracker.
Together with Bill McKibben of 350.org, who is leading a successful divestment campaign at American colleges, Mr. Leaton wrote in an Op-Ed in the Guardian newspaper:The six trillion dollar bet is that this calculation remains entirely theoretical, and that fossil-fuel companies will be allowed to keep pumping up the carbon bubble by investing more cash to turn resources into reserves, and continue booking them at full value, assuming zero risk of devaluation. It’s a bet that effectively says to government: “nah, we don’t believe a word you say. We think you’ll do nothing about climate change for decades.”
News organizations in Britain made the link between a carbon bubble and further troubles for financial markets, with the Guardian running the report on its front page. Of course, not everyone is convinced of the financial danger that would only be present if the world’s government actually got serious about curbing carbon emissions.
Tim Worstall, a fellow with the free-market Adam Smith institute in London, charged on Forbes.com that among numerous, serious errors, the environmentally “safe” carbon budget allocated by the report is too low, which leads to a low estimate on the value of fossil fuel reserves on companies’ books.
But the report is not the first to warn of a “carbon bubble.” In January, a group of investors, environmentalists and businessmen wrote an open letter to the Financial Policy Committee of the Bank of England warning against heavy investments in carbon.
Last month the Canadian Centre for Policy Alternatives released its report on Canada’s “stranded” fossil fuel assets.
What do you say? Is talk of a “carbon bubble” actually wishful thinking from environmentalists? Is there any break on the amount of carbon humankind will use, other than the amount of reserves it can exploit? Is the L.S.E. report useful?
Fonte: blogs.nytimes.com
