Abby L. Harvey
GHG Monitor
12/4/2015
If companies continue investing in a way that supports fossil fuel development, they could end up wasting $2 trillion, buried in fossil fuel projects that cannot go forward if nations are to get on track to limit global temperature rise to 2 degrees Celsius, according to a report published last week by Carbon Tracker. “Over $2 trillion of capex [capital expenditure] needs to not be approved in order to avoid around 156 GtCO² of emissions – the equivalent of cutting supply and the subsequent emissions by around a quarter in the markets covered in this analysis,” the report says.
The independent financial think tank analyzed the potential carbon emissions from oil, natural gas, and coal projects and weighed those emissions against the financial investment made in such projects. According to the report, “oil represents around two-thirds of the financial risk but a fifth of the carbon risk, whilst coal carries around half of the carbon risk, but only a tenth of the financial risk. Gas is low in terms of the carbon risk, but still carries around a quarter of the financial risk.”
Investment in the expansion of carbon-heavy industries carries risk because those projects might not even be needed in the future as the world transitions to lower-carbon, or even no-carbon, energy generation options. In such a decarbonized future, atmospheric CO2 levels would be limited to 450 ppm, the level at which the world can avoid global temperature rise of more than 2-degrees. For example, the report says, “perhaps the starkest conclusion is that just perpetuating the production from some of the existing coal mines is sufficient to meet the volume of coal required under the 450 scenario. It is the end of the road for expansion of the coal sector.”
In considering these projects, which will not be supported or needed in a low-carbon future, Carbon Tracker has identified “a danger zone of projects” that would put $2 trillion at risk: “This capital would result in the financing of fossil fuel projects that are unneeded to achieve a 2°C pathway. … Most fossil fuel incumbents so far prefer to deny that the world is changing and instead seek to justify dangerous expansion based strategies.”
