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The Carbon Bubble - Apr 24

Click on the headline (link) for the full text.

Carbon bubble will plunge the world into another financial crisis – report

Damian Carrington, The Guardian
The world could be heading for a major economic crisis as stock markets inflate an investment bubble in fossil fuels to the tune of trillions of dollars, according to leading economists.

"The financial crisis has shown what happens when risks accumulate unnoticed," said Lord (Nicholas) Stern, a professor at the London School of Economics. He said the risk was "very big indeed" and that almost all investors and regulators were failing to address it.

The so-called "carbon bubble" is the result of an over-valuation of oil, coal and gas reserves held by fossil fuel companies. According to a report published on Friday, at least two-thirds of these reserves will have to remain underground if the world is to meet existing internationally agreed targets to avoid the threshold for "dangerous" climate change. If the agreements hold, these reserves will be in effect unburnable and so worthless – leading to massive market losses. But the stock markets are betting on countries' inaction on climate change.

The stark report is by Stern and the thinktank Carbon Tracker. Their warning is supported by organisations including HSBC, Citi, Standard and Poor's and the International Energy Agency...
(29 April 2013)
Link to the report

Countries most exposed to the carbon bubble - map


(19 April 2013)

How your pension is being used in a $6 trillion climate gamble

Bill McKibben and Jeremy Leggett, The Guardian
Suppose you weren’t worried that we humans are destroying our water supply and eroding our ability to feed ourselves by burning coal and gas and oil and hence changing climate. Suppose you thought that was all liberal hooey. What might worry you about fossil fuels instead? How about a six trillion dollar bet, including a big slug of your own money, on people not doing what they have said they are going to do, and that some have already sworn to do in law?

Six trillion dollars is what oil, gas, and coal companies will invest over the next ten years on turning fossil fuel deposits into reserves, assuming last year’s level of investment stays the same. Reserves are by definition bodies of oil, gas or coal that can be drilled or mined economically. Regulators allow companies, currently, to book them as assets, and on the assumption that they are at zero risk of being stranded - left below ground, "value"unrealized - over the full life of their exploitation. Yet a report published today shows they are at very real risk of being stranded, and in large quantity.

Governments agreed in 2010 to keep global warming below two degrees. The Carbon Tracker Initiative, a group of concerned financial analysts based in London, has teamed up with the Grantham Institute, a climate research centre, to calculate how much carbon it would take to reach that two degree threshold, and what it means for the capital markets. By this calculation, fully 60 to 80% of oil, gas and coal reserves listed on stock exchanges are unburnable...
(19 April 2013)

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