Dec 8, 2013
Financial Crisis Looms From Carbon, Experts Say
Posted on Apr 19, 2013
The next global economic shock could come from the carbon markets as an investment bubble in fossil fuels grows to the tune of trillions of dollars.
“The financial crisis has shown what happens when risks accumulate unnoticed,” said Lord Nicholas Stern, a professor at the London School of Economics. The risk was “very big indeed,” he said, and almost all investors and regulators were failing to address it.
The carbon bubble is a result of an overvaluation of oil, coal and gas stores held by energy companies. According to a report published Friday, at minimum, two-thirds of these reserves will be kept underground if countries stick to existing internationally agreed upon emissions targets to avoid more than a 2 degree rise in the world’s temperature.
Given major industrial nations’ failure to meet previous targets, however, it is unlikely the 2 degree limit will be respected. But if the agreements hold, the reserves in question will be unburnable and worthless. That would produce massive market losses. But the stock markets are betting against it.
—Posted by Alexander Reed Kelly.
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