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October 11, 2011 / Mike Piskur

The Global Carbon Bubble

This article from The Guardian highlights a sobering report produced by the Carbon Tracker Initiative. The report – Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?- posits that 80 percent of the world’s fossil energy reserves are “unburnable” if the planet is to drastically reduce carbon emissions and avoid catastrophic climate change.

The report details three salient facts: in order to reduce the risk of exceeding two degrees celsius warming to a 20% chance, our carbon-burning budget for the next 40 years is 565 GtC02. Total proved fossil fuel reserves are estimated at 2795 GtC02, nearly five times the remaining budget, implying 80% of these reserves should be left in the ground. Seventy-four percent of these reserves are state owned, while 26% is owned by the 100 largest listed coal companies and 100 largest listed oil and gas companies.

The report estimates the value of proven fossil energy reserves at $27 trillion, which means that the state funds and companies that own the oil, coal, and gas are overvalued by $20 trillion. Markets ignore this risk today, and likely will continue to do so into the foreseeable future barring a drastic shift in the regulatory and economic landscape.

Rising fossil fuel stock prices indicate that the markets assume we will blow past the 2 degree warming limit without blinking, while scientists estimate that three billion people will lose access to fresh water at four degrees warming

The consequences of a four degree global temperature increase are unknown, but they almost certainly include severe droughts, water shortages, crop failures, species extinctions, and more intense, devastating, and costly natural disasters. This should provide more than enough motivation to move toward a post carbon economy. The world’s largest firms are starting to get this it but are taking baby steps when the world needs giant leaps. Washington’s inability to accomplish much of anything renders a Manhattan Project-type effort all but impossible. It seems that the burden falls on individuals and communities to create bold solutions and ensure that the bursting of the Carbon Bubble doesn’t take the global economy and environment along with it.

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