It’s widely assumed that the lack of will from governments and industry to take the radical steps required to tackle climate change result from the difficulties the non-scientific community has in grasping the science behind the dire warnings we have all been hearing for decades. But maybe the most significant shift in attitudes is about to happen and it won’t be because of a burgeoning wider understanding of the scientific data. Instead it will be because financial markets are becoming worried that fossil fuels are destined to turn into toxic assets — toxic not because their combustion is poisoning the planet but because they are going to plummet in value.
The Guardian reports: The huge reserves of coal, oil and gas held by companies listed in the City of London are “sub-prime” assets posing a systemic risk to economic stability, a high-profile coalition of investors, politicians and scientists has warned Bank of England’s governor, Sir Mervyn King.
In an open letter on Thursday, they tell King that the global drive to reduce carbon emissions could mean billions of pounds of fossil fuel reserves will rapidly lose value and cause a “major problem” for institutional investors and pension funds.
At the most recent UN climate change summit in December, 194 of the world’s nations agreed to enact legally binding curbs on greenhouse gas emissions within three years to limit global warming to 2C. But meeting this limit would mean just 20% of existing fossil fuel reserves could be burned, according to recent research.
“These high-carbon assets pose significant strategic challenges for the future prosperity of Britain that just can’t be ignored,” said investment manager James Cameron, who is a member of the prime minister’s business advisory group. “Investors continue to pour cash into unsustainable assets without understanding the risks associated with these investments, such as climate change, local pollution, fossil fuel price volatility, political risk and catastrophes such as Deepwater Horizon.”
The letter is also signed by the government’s former chief scientific adviser Sir David King, Zac Goldsmith MP, former environment minister John Gummer and 17 others. It urges action to investigate the risk of the “carbon bubble”.
So those magical substances that make us almost godlike in our power will become worthless as the politcal process to manage climate change picks up momentum. Well, that seems a bit optimistic to me. I haven’t noticed much movement in that process lately. Fossil fuels will indeed become worthless eventually. For a very simple reason. You have to burn energy to get energy. As the energy cost of extraction rises, eventually the point will arrive at which fossil fuels are simply no longer worth extracting. Plowing with draft animals will make more sense.