A new report from the Carbon Tracker Initiative (CTI) finds that there is $1 trillion worth of fossil fuel projects expected over the next decade that could be thrown into doubt if governments begin to take action to curb greenhouse gas emissions.
The concept known as the "carbon bubble," largely put forward by CTI, is based on the notion that in order for the world to avoid the worst effects of climate change, global greenhouse gas emissions will have to be cut back significantly. If action is indeed taken – say through carbon pricing – investors stand to lose billions if not trillions in misallocated capital expenditures.
Previous research from CTI found that about two-thirds of the booked reserves from the world's largest fossil fuel companies – reserves that these companies expect to produce – cannot be burned. The latest report puts a dollar figure on that amount – an estimated $1 trillion over the next decade. By 2050, that figure balloons to $21 trillion.
CTI found that the most at-risk region in the world was Alberta, with its abundant reserves of oil sands. Canada is expected to see $400 billion worth of investment through 2025, much of which could be put at risk if the world constrains carbon. Other areas include ultra-deepwater projects such as offshore Brazil or the Arctic.
It is far from clear that countries will actually find the resolve to enact strict limits on carbon pollution, but CTI argues that fossil fuel companies have a lot at stake in ensuring that they do not. ExxonMobil recently said that it was "highly unlikely" that the world would cut emissions significantly. "We are confident that none of our hydrocarbon reserves are now or will become 'stranded,'" the company wrote in a report this year on risks to its business.
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Written by Joao Peixe at Oilprice.com.