Perhaps the most chilling observation in Bill McKibben’s Rolling Stone article is that large quantities of climate-disrupting fossil fuels have already been factored into financial projections. The logic of finance creates into own realities, which are not easily discounted.
Yes, this coal and gas and oil is still technically in the soil. But it’s already economically aboveground – it’s figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony.
As McKibben describes, these calculations include fuels that — given scientific understanding of radiative forcing — are expected to push global temperatures past a 2°C increase. Keeping them in the ground offers the best hope of relative climate stability.
But according to calculations by John Fullerton of The Capital Institute, not extracting these fuels would mean a financial write-off of $20 trillion — deflating a massive carbon bubble.
Starting with the July 2011 report “Unburnable Carbon” from the Carbon Tracker Initiative:
[U]sing just the reserves listed on the world’s stock markets in the next 40 years would be enough to take us beyond 2°C of global warming. This calculation also assumes that no new fossil fuel resources are added to reserves and burnt during this period – an assumption challenged by the harsh reality that fossil fuel companies are investing billions per annum to find and process new reserves. … In addition, over two-thirds of the world’s fossil fuels are held by privately or state owned oil, gas and coal corporations, which are also contributing even more carbon emissions.
From Fullerton’s October 2011 Guardian article, “The big choice: money or planet?”:
A cap on carbon emissions designed to limit warming to two degrees will mean sovereign states and public corporations must strand 80% of their $27tn of proved reserves and related assets, a loss exceeding $20tn.
If we incur a write-off of this magnitude, the risk that our fragile and interconnected global economy would collapse is high. …
The portion of the $20tn cost potential that will be written off depends upon unknowable developments in carbon sequestration technology. Prudence suggests that we should plan on incurring at least half of this potential loss, and get serious about developing and implementing policies to limit carbon pollution.
From Fullerton’s blog last week, “Financial Overshoot”:
Thus civilization is facing our $20 trillion big choice–our investments or our planet. Recall the direct financial losses of the subprime crisis in the US were a mere $2.7 trillion, and we know what that did.
[Bill McKibben’s] cover story this week in Rolling Stone, “Global Warming’s Terrifying New Math,” is a powerful expansion of this thesis, again built on the Carbon Tracker Report, and naming the fossil fuel industry as the enemy in the war on climate change. Unfortunately, if the fossil fuel industry is the enemy, then the enemy must include the fossil fuel rich sovereign States themselves that account for 76% of proved reserves.
A few notes:
- Some are less sanguine than Fullerton about carbon capture and storage technologies. Even if such technologies prove feasible, they would certainly reduce energy return on energy investment, and also require calculations of carbon return on carbon investment, meaning the net gain, given the amount of carbon emitted in technology development, production, and operation.
- As to McKibben’s insistence on naming enemies, Fullerton demurs, as I did (“Humanity’s carbon budget”).
- It becomes clear, yet again, that effective responses to a changing climate will depend on a complete overhaul of existing institutions. As we’ve heard it said, “Civilization needs a new operating system.”