In order to limit global warming to an average of no more than 2 degrees Celsius, the official UN climate target, the equivalent of 2230 gigatonnes CO2 of proven fossil fuel reserves should remain in the ground, a report published on Monday by the Carbon Tracker Initiative (CTI) states.

CTI is a project to align capital markets with efforts to tackle climate change.

The referred carbon budget is linked to the 450 Scenario – the emissions trajectory that aims to limit the rise in atmospheric greenhouse gases to no more than 450 ppm CO2 equivalents. According to the IEA this scenario requires global emissions to plateau in this decade – and for instance for both Peak Oil and Peak Coal to occur before 2020.

Private and public fossil reserves

The new Carbon Tracker Initiative report seems to indicate we cannot trust market forces to achieve these climate goals – as the discrepancy between  ‘allowed atmospheric emissions space’ and proven carbon reserves is simply to big – and a large part of these reserves are already owned by energy companies.

According to the report the top 100 coal companies and the top 100 oil companies presently own 745 gigatonnes CO2 worth of fossil fuel reserves. Burning this stock would raise atmospheric CO2 concentrations higher than the 450 limit. The entirety of proven reserves owned by private and public companies and governments is equivalent to 2,795 gigatonnes of CO2, almost 5 times as much as the 450 Scenario allows us to consume.

In the period between 2000 and 2011 the world has not shown much understanding of carbon scarcity. Fossil fuel consumption led to the release of 321 gigatonnes of CO2 over the last decade, 36 percent of the total allowed emissions space of 886 Gt between 2000 and 2050.

‘Risk committees should address carbon bubble’

The CTI states the current structure of financial markets plays a key role in the unabated exploration of the fossil fuel reserves: “[…]many investors are backing huge fossil fuel reserves purely as a result of the structure of the financial products they invest in. The continued focus on short term returns perpetuates the status quo.”

As an example the CTI shows the world’s leading financial markets have a large and growing share of fossil fuel reserves listed on their exchanges. As atmospheric science clearly shows burning the entire stockpile can be no option to anyone the CTI argues that economic risk assessment committees should urgently address the ‘carbon bubble’ – as the continued fossil fuel investments not only undermine a transition to a low/zero carbon energy supply – they will also decrease the world’s financial stability, as inflating the bubble will lead it to burst.

© Rolf Schuttenhelm | www.bitsofscience.org