Experts are warning that Trillions of dollars are at risk as stock markets inflate value of fossil fuels that may have to remain buried forever. and global stock markets are betting on countries failing to adhere to legally binding carbon emission targets.
This topic was mentioned briefly in citisven's excellent diaries but I feel it needs its own platform due to the seriousness of the threat of a global financial crisis due to the magnitude of the money involved.
The Guardian reports on the new study by Lord (Nicholas) Stern, a professor at the London School of Economics and the thinktank Carbon Tracker.
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.Global stock markets are betting on countries failing to adhere to legally binding carbon emission targets just as they bet that prices in the housing market could keep rising forever. It's in the nature of unfettered capitalism that short term thinking which leads to the quick profit predominates.
The stark report is by Stern and the thinktank Carbon Tracker. Their warning is supported by organizations including HSBC, Citi, Standard and Poor's and the International Energy Agency. The Bank of England has also recognised that a collapse in the value of oil, gas and coal assets as nations tackle global warming is a potential systemic risk to the economy, with London being particularly at risk owing to its huge listings of coal.
Stern said that far from reducing efforts to develop fossil fuels, the top 200 companies spent $674bn (£441bn) in 2012 to find and exploit even more new resources, a sum equivalent to 1% of global GDP, which could end up as "stranded" or valueless assets. Stern's landmark 2006 report on the economic impact of climate change – commissioned by the then chancellor, Gordon Brown – concluded that spending 1% of GDP would pay for a transition to a clean and sustainable economy.
I urge you to read the report and you might rethink any financial exposure you may have due to investment in fossil fuel industry stocks. They are usually included in group funds such as money market etc. The choice seems to be either we divest of fossil fuel investments or make some money off of them and watch our planet go up in flames.