The Carbon Bubble: Are We Exploring for Fossil Fuels We Won't Need?

The Carbon Bubble: Are We Exploring for Fossil Fuels We Won't Need?
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Despite an international agreement to reduce emissions from carbon-intensive sources, oil and coal companies continue to pour hundreds of billions of dollars a year into finding new fossil fuel deposits containing enough carbon to more than double global climate pollution emissions.  

This is the conclusion of a new report finding that $674 billion was spent globally last year alone on the discovery of new fossil fuel deposits that will likely never be used. 

The report, Unburnable Carbon 2013: Wasted Capital and Stranded Assets, authored by researchers at the Carbon Tracker Initiative, Grantham Foundation and the London School of Economics and Politics, describes the idea of a “carbon bubble” that is the result of global fossil fuel reserves that already far exceed the maximum amount we can afford to burn and still avoid the most disastrous effects of climate change.

Despite this growing carbon bubble, and the inevitable movement towards a greatly reduced reliance on carbon intensive fuels in the future, energy companies continue to pour billions of dollars into discovering new fossil fuel reserves. 

If this all plays out as researchers predict, energy companies will end up with a potential $6 trillion in stranded assets that will never be exploited – oil and coal reserves that the world will not need.

It’s kind of like buying five cars, when you only need one, so four of the cars just sit and rust in a field. But for oil companies these stranded assets aren’t a few old rusty Fords, but instead vast tracks of land of significantly diminished value in a world that no longer requires their product to operate.

According to the report:

“The analysis shows that between 60-80% of coal, oil and gas reserves of publicly listed companies could be classified ‘unburnable’ if the world is to achieve emissions reductions that mean an 80% probability of not exceeding global warming of 2°C.”

This conclusion is based on the most optimistic reduction targets resulting in only 2 degrees Celsius of warming, but even at 3 degrees of warming (a totally disastrous scenario), the report concludes that there would still be “significant restraints on our use of fossil fuel reserves between now and 2050. Yet companies in the oil, gas and coal sectors are seeking to develop further resources which could double the level of potential CO2 emissions on the world’s stock exchanges to 1,541 billion tonnes.”

These companies are investing billions and billions without taking into account even these most conservative reduction projections.

Professor Lord Nicholas Stern of Brentford, Chair of the Grantham Research Institute on Climate Change and the Environment, said:

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. They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision. But I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements.”

So what about Canada and its tar sands operations?

Are we creating a massive carbon bubble? You bet. I will be exploring this further in the coming days.

The Carbon Bubble: Are We Exploring for Fossil Fuels We Won't Need?

Kevin is a contributor and strategic adviser to DeSmogBlog.

He runs the digital marketing agency Spake Media House. Named a “Green Hero” by Rolling Stone Magazine and one of the “Top 50 Tweeters” on climate change and environment issues, Kevin has appeared in major news media outlets around the world for his work on digital campaigning.

Kevin has been involved in the public policy arena in both the United States and Canada for more than a decade. For five years he was the managing editor of DeSmogBlog.com. In this role, Kevin’s research into the “climate denial industry” and the right-wing think tank networks was featured in news media articles around the world. He is most well known for his ground-breaking research into David and Charles Koch’s massive financial investments in the Republican and tea party networks.

Kevin is the first person to be designated a “Certified Expert” on the political and community organizing platform NationBuilder.

Prior to DeSmogBlog, Kevin worked in various political and government roles. He was Senior Advisor to the Minister of State for Multiculturalism and a Special Assistant to the Minister of State for Asia Pacific, Foreign Affairs for the Government of Canada. Kevin also worked in various roles in the British Columbia provincial government in the Office of the Premier and the Ministry of Health.

In 2008 Kevin co-founded a groundbreaking new online election tool called Vote for Environment which was later nominated for a World Summit Award in recognition of the world’s best e-Content and innovative ICT applications.

Kevin moved to Washington, DC in 2010 where he worked for two years as the Director of Online Strategy for Greenpeace USA and has since returned to his hometown of Vancouver, Canada.

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