AÂ new report from Carbon Tracker has found that, if the world makes a deal at the Paris climate summit to limit global warming below the already agreed to rise of 2 degrees celsius,Â fossil fuel companies worldwide are in danger of stranding up to $2 trillion of investors’ funds over the next decade.
The report concluded that a huge amount of investment money could be lost if (or when) a global deal is struck to significantly lower emissions over time. A deal will serve to shrink the overall global market for fossil fuels. A major issue is the fossil fuel industry’s failure to adequately prepare for the inevitable transition to a low-carbon world economy, primarily by failing to foster commercial opportunities in low-carbon energy.
If dangerous climate change is to be avoided, the coal industry in particular will have to be phased out over time. Certainly, new coal mines will not be wanted anywhere in the world. The industry will need to transition quickly or die. Oil demand will also need to peak around 2020, the report found, which is not something oil companies are preparing for. New oil projects to the tune of $1.3 trillion, and even $124 billion slated for existing projects, will not be wanted. These projects include high-cost, carbon-intensive operations such as deep-sea oil drilling, tar sands, and shale oil extraction.
Instead of leading a transition to a low-carbon future, the massive fossil fuel industry is mostly ignoring the situation, and still defending its continued exploration for more. Even the much hyped development of commercial-scale carbon capture and storage (CCS) technology has been very slow, given that it will be crucial if the industry is to survive into the future.
It’s no surprise but, instead of taking the initiative to change, fossil fuel companies have waited for governments to legislate for change, and often lobbied to keep the status quo. It’s inevitable that legislative change will come, and even if it doesn’t soon, it’s quite possible that the exponential growth of renewable energy could end up making international climate agreements unnecessary. Companies have been caught out before in fast transitions to new technologies; recently, those have included Kodak and Blockbuster. For the most part, they didn’t see it coming in time.
Image CC licensed byÂ Tim J Keegan: Stranded coal ship, Australia
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