Unburnable Carbon: Bill McKibben’s frightening math

Written by Dave Lisle   // August 14, 2014    1 Comment

An article by veteran American environmental campaigner Bill McKibben appearing in Rolling Stone a couple of years ago framed the issue of dealing with climate change in a simple and remarkably vivid way. McKibben posed climate change as a problem of simple arithmetic – the headline read “Global Warming’s Terrifying New Math”. That math involves three key numbers:

  • 2 – degrees global temperature increase.
  • 565 – gigatons (gt) of fossil fuels that might be “safely” burnt to meet the 2°Ctarget.
  • 2795 – gt of carbon in proven reserves of fossil fuels.

As the latest IPCC report noted in its discussion of “unburnable carbon”, the only conclusion possible as a result of doing the math is that most of these reserves must stay in the ground. Part of McKibbon’s prescription for making this happen is a global divestment campaign (see 350.org).

The figure of proven reserves – 2795 – comes from the Carbon Tracker Initiative where accountants trawled through databases to figure out how much carbon was sitting on company balance sheets. Yet this proven reserves figure is likely to be significantly understated because of the recent surge in projects (particularly in the US) to exploit shale oil and gas as well as other unconventional gas sources.

Although these reserves are still technically in the ground, from the perspective of accountants and investors they are above ground because they have been factored into share prices. This simply reflects the market’s assumption that it will be burnt. So according to the world’s financial markets we are set for a catastrophe.

But markets are quite capable of getting it wrong and these reserves might end up becoming “stranded assets”. Assets become stranded when they are unable to be realized at their current value. The implication of this unburnable carbon is that many believe there is a significant carbon bubble forming in financial markets. It is estimated that the value of proven reserves (relating to the 2795 gt of carbon) is $27 trillion – so if you leave eighty percent of it unburnt, you must write off more than twenty trillion dollars. To put this into perspective – the global financial crisis involved losses (perhaps) in the order of $12 trillion. Where does your pension fund invest?

A team from Oxford assessed the unburnable carbon/stranded assets situation with a comprehensive report entitled “Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets?”. The findings and recommendations were interesting and suggested that the divestment campaign would have an initially weak influence on share prices of firms with exposure to fossil fuel risk. But its effect would be primarily felt in terms of stigmatization which “while likely to cost fossil fuel companies billions, is unlikely to threaten their survival. Coal companies will probably be the hardest hit segment of the market”.

The aim of those advocating for divestment and carbon transparency is to create awareness of the carbon bubble which might channel investment funds into other areas such as alternative energy. In its global energy outlook 2014 report the International Energy Agency (gu)estimates that investment somewhere in the order of $50 trillion (a fifth of which is in efficiency measures) is required by 2035 in order to bend the global economy towards a path that might make 2°C possible.

Transparency advocates are gaining some traction. In March this year ExxonMobil – under pressure from shareholder groups – became the first of the oil majors to detail their exposure to potential “stranding” or in their careful wording, exposure to “stricter limits on carbon emissions”. This disclosure came in response to an earlier shareholder resolution that had highlighted the possibility of lower fossil fuel prices resulting from “carbon regulation or market forces.”

Article image by Dave Lisle.


About Dave Lisle :

I am a freelancer currently based in a small Australian east coast town. After studying economics, most of my life has been devoted to travelling – by foot and bicycle – contemplating the nature of existence and the existence of nature. I am presently pursuing postgraduate studies in international relations with a focus on political economy. Blogging allows engagement with critical issues and is far more satisfying than yelling at the radio.

Tags:

climate change

divestment

energy

stranded assets


1 COMMENT

  1. By Dave Lisle, August 20, 2014

    After posting this article I came across a rather gloomy statistic that gives pause to those of us looking towards a shift is investment flows towards renewables. Apparently in 2013, investment directed towards fossil fuel extraction in the US was $200 billion – a RECORD amount! According to Bloomberg the US is now the world’s biggest oil producer. It become the leader in oil and gas (combined) in 2010.
    The geopolitical ramifications of this are (likely) great but uncertain. For decades US policy makers have fretted about energy security – yet steps to move beyond fossil fuels have been extremely hesitant. Having more oil and gas improves America’s position relative to its trade “partners”(read competitors). Could this new found “energy independence” weaken the resolve of the world’s most powerful state to help force a global deal on climate change at the crucial 2015 meeting in Paris?
    Some suggest that a factor in the EU’s enthusiasm to conclude the Transatlantic Trade and Investment Partnership (the subject of a forthcoming article) is Germany’s sense of vulnerability about its oil and gas supplies – the agreement might lead to America reversing its ban on energy exports reducing its dependence on Russia.
    Perhaps the “Shale Revolution” is not merely rhetorical.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Similar posts

20-20-20 Objectives

2012

3 scopes

3D printing

academia

ACHEMA

acidification

agriculture

air quality

aluminum

Ankara

antarctic ozone hole

apocalypse

assessment

atmospheric carbon measurement

B2B

Bachelor program

background database

BASF

battery change station

Bauwesen

best practice

bike sharing

bio capacity

bio-economy

biocapacity

biodiversity

biological gas treatment

biomass

blogs

BMBF

books

Brazil

BREEAM

building sector

building standards

business opportunity

carbon

carbon accouting

carbon assessment

carbon emissions

carbon footprint

carbon footprinting

carbon free city

carbon intensity

carbon leakage

carbon management

carbon neutral

carbon neutrality

carbon reduction

carbon relocation

carbon tax

carbon-neutral travel

cargo shipping

carton

central america

central asia

certification

CFC

change

chemical engineering

chemical industry

China

circular economy

circular flow economy

city

climate change

climate control

climate impact

climate neutral

climate protection

club of rome

CO2 balance

CO2 reduction

co2-equivalent

CO2-Fußabdruck

cogeneration

collaborative consumption

combined reporting

commercial sector

commons

comparative life cycle assessment

Competence Center

composite indicator

compost

composting

consistency

construction

construction industry

Consumer goods

consumption

container ship

cooperation along product life cycle

copenhagen

corporate carbon footprint

corporate culture

corporate material flow modeling

Corporate Social Responsibility

cost accounting

cost reduction

cost savings

cost-effective measures

Country Attractiveness

CPF

cradle to cradle

creative destruction

Creative Sustainability

Critique of the Green Economy

cross-collaboration

CSR

CSR report

customer-driven sustainability

cycling

dairy

Dashboard of Sustainability

database

Davos

de-growth economy

decarbonization

dematerialization

denmark

design

developing countries

developing world

development cooperation

Dienstleistungen

distributed manufacturing

divestment

domestic fuel consumption

domestic sector

double decoupling

e-car

e-mobility

e-sankey

e!Sankey

earth overshoot day

Earth Sciences

Earth summit

eCarUs

eco city

eco design

eco label

ecodesign

ecoinvent

Ecolabelling

ecologic footprint

ecological footprint

ecological resilience

ecological tax reform

economic indicators

ecosystem disturbance

ecovillage

education

efficiency

efficiency factory

efficiency investment

efficiency measures

efficient construction

Effizienzfabrik

EHS

eLCAr

electric car

emerging economies

emission gap

emission relocation

emissions

EMS

Energieeffizienz

energiewende

energy

energy contracting

energy efficiency

Energy Efficiency Directive

energy efficiency in production

energy efficient production

Energy Intensity by Sector

energy management

energy performance

energy reduction

energy sources

energy transition

engineering excellence

Enhipro

enms

environment

Environment Ministry

environmental accounting

environmental awareness

environmental balance

environmental capital

Environmental Contracting

environmental control

environmental cost accounting

Environmental Engineering

Environmental Goods and Services Sector

Environmental Governance

environmental impact

environmental impact data

environmental labeling

environmental LCA

environmental management

Environmental management accounting

environmental management system

environmental performance

environmental performance indicator

environmental policy

environmental product declaration

environmental product declarations

environmental profit and loss statement

environmental regulation

environmental standard

Environmental Sustainability Index

environmental technology verification

Environmentally Extend Input Output modelling

environmentally friendly raw materials

Environmentally Harmful Subsidy

Environmentally Weighed Material Consumption

EPD

EU

Europe

European Comission

european commission

European Green Cars Initiative

European Sustainable Development Strategy

eutrophication

EVALEAU

events

external effects

fashion

FIFA

fish

fishery

flow sheet simulation

food footprint

food industry

food loss

food production

food sector

food waste

footprinting

forest ecosystems

forestry

fouling

FPC

free trade

freighter travel

full cost accounting

gate-to-gate

gate-to-gate approach

geopolymer cement

Germany

Ghana

GHG emissions

GHG mitigation

GHG reduction

GHG reduction goals

glass

Global Compact

global justice

Global Supply Chains

global warming

global warming potential

GMO

governance

green building

green buildings

green business

green business models

green Christmas

green construction

green consumers

green economy

green growth

green investment

green jobs

green living

green new deal

green paradox

green production

greenhouse gas emissions

greenhouse gas inventory

greenhouse gas protocol

greenhouse gas reduction

greenhouse gases

greenwash

GRI

handprinting

Happy Life Years

harmonization

Harze

HDPE

heat integration

Herman Daly

HFC

holistic approach

holistic sustainability

human development index

HVAC

IEA

IFEU

ifu hamburg

ILCD Handbook

impact assessment

impact category

incentive

Incentive-based pay

incineration

India

industrial ecology

industrial location choice

industrial production

industrial sector

information design

innovation

input output

input-output databases

input-output economics

InReff

insulation

Integrated Reporting

integrated resource efficiency

integrative approach

intellectual property

internalization of externalities

international standards

interplant collaboration

IPCC

ISO

ISO 14000

ISO 14001

ISO 14008

ISO 14015

ISO 14025

ISO 14031

ISO 14040

ISO 14046

ISO 14051

ISO 14064

ISO 14067

ISO 50001

Jevon’s Paradox.

knowledge economy

Konsumgüter

Kooperation entlang des Produktlebenszyklus

Kuznets curve

Kyoto protocol

LCA

LCA data from suppliers

LCA database

LCA Databases

LCA inventory analysis

LCA recommendations

LCA software

LCM Berlin

lean manufacturing

Lebenszyklusperspektive

LEED

life cycle

life cycle analysis

life cycle assessment

life cycle engineering

life cycle inventory

life cycle management

life cycle perspective

life cycle thinking

life style

lifecycle

limits to growth

LinkedIn

living planet report

Long-Term Pay

low carbon economy

low-carbon transport

low-energy house

management models

manufacturing industry

masdar city

master program

material consumption

material efficiency

material flow

material flow accounting

Material Flow Accounts

material flow analysis

material flow balance

material flow cost accounting

material flow cost analysis

Material Flow Management

material flow modeling

material flow networks

material flowcosts

material flows

material footprint

material losses

materialeffizienz

meat

mechanical-biological treatment

media

metal industry

methodology

Mexico

MFA

MFCA

milk

modeling

Monetize external costs

Montreal Protocol

municipal solid waste

Natural Cost Accounting

nature conservation

Nepal

NIMBY

nitrate pollution

nuclear phase out

nutrients balance

nutrients cycle

OECD

OECD Environment Policy Committee

Ökobilanz

Ökobilanzdaten

Ökobilanzdaten vom Zulieferer

Ökobilanzdatenbanken

Ökobilanzierung

Ökolabelling

Ökologischer Fußabdruck

oligolopoly

Online Resource Efficiency Platform OREP

operational efficiency

optimization

organic agriculture

outsourcing

ozone layer recovery

packaging

PAS

passive house

patents

PET

philippines

phosphorus

photovoltaics

pilot program

pinch analysis

plastic industry

policy

policy instruments

politics

pollution haven hypothesis

post growth economy

post oil age

PR

process engineering

process heat

process improvement

process modeling

process modelling

Process Optimization

process system engineering

product carbon footprint

product environmental footprint

Product life time

product stewardship

production

production circle

production planning

production system

Production-based CO2 Productivity

productivity

Produktlebensdauer

protection proprietary data

PUMA

PVC

qatar

quality

quality journalism

quantified self

Rapid prototyping

rebound effect

recycling

refuse-derived fuel plant

remuneration

remuneration of environmental performance

renewable energy

renewable energy in manufacturing

renewable heat

renewable hydrogen

renewable methane

renewable process heat

renewable raw material

Renewable Resources

renewable thermal energy

resilience

resource conflicts

resource efficiency

Resource Efficiency Framework

resource flows

resource politics

resource productivity

resources

ressource efficiency analysis

ressourceneffizienz

retailer

reuse

RFID

Rio+20 summit

rising material demand

risk management

Rolf Dobelli

sankey diagram

saving potentials

savings

Schutz vertraulicher Daten

scope 3

seafood

season's greetings

seattle

services industry

shopping rage

smart grid

smart meter

SMB

social cost accounting

social LCA

social media

social metabolism

Social-Ecological Resilience

software

solar energy

solar heat

solar thermal energy

South Africa

South America

South Korea

soy milk

stakeholder management

standards

statistics

steady state economy

steel

stranded assets

strong sustainability

studies

sufficiency

supermarket chain

sustainability

sustainability consulting

sustainability control

sustainability indicators

sustainability innovation

sustainability management

sustainability performance

sustainability projects

sustainability reporting

Sustainability Science

sustainability strategy

sustainability triangle

sustainable agriculture

sustainable architecture

sustainable business

sustainable construction

sustainable development

sustainable housing

sustainable lifestyle

Sustainable Living

Sustainable Process Index

sustainable resins

Sustainable Resource Management

sustainable transport

sydney

system analysis

tajikistan

telecommunications

Telekommunikation

Tesco

textile industry

textile refinement

Tobias Viere

total material consumption

trade

transparency

transport

transport emissions

transport sector

Treibhauspotenzial

trends

triple bottom line principles

Turkey

Umberto

umberto for carbon footprint

umberto user workshop

Umweltbilanz

Umweltbundesamt

umweltfreundliche Rohmaterialien

university

upcycling

urban carbon emissions

VDMA

Vélib’

vernon curve

vertical cooperation

Vertragsnaturschutz

virtual water

waste air treatment

waste cycle

waste disposal

waste hierarchy

waste management

waste prevention

wastewater

wastewater treatment

water abstraction rate

Water Consumption by Sector

water extraction

water filter

water footprint

Water Management

water stress

web 2.0

Wellbeing Index

wind gas

wind power

wine

with both eyes open

working conditions

world cup

world statistics day

world vegan day

YET

zero carbon

zero carbon city

zero emission mobility

zero growth

zero growth economy