A carbon bubble means that the true costs of carbon dioxide in intensifying climate change is not taken into account in a company's stock market valuation  and the economic bubble affected by the valuation of fossil fuels based assets. Currently the price of fossil fuels companies shares is calculated under the assumption that all fossil fuel reserves will be consumed. The cost of using fossil fuels may be higher than leaving it unused. The true cost of coal should be allocated to all current and past users.
According to the UK MP Committee overvaluing companies that produce fossil fuels and greenhouse gases poses a serious threat to the economy. The UK MPs Committee warned British government and Bank of England of the risks of the carbon bubble in 2014.
Carbon bubble appears to be a recent term. A search of English books on Google Ngram revealed no instances of this term.
The term "carbon bubble" was popularized by the Carbon Tracker Initiative. It published key reports in July 2011 and April 2013:
- Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?
- Unburnable carbon 2013: Wasted capital and stranded assets
To avoid the carbon bubble companies should be forced by law to report on their greenhouse gas emissions and assess the risk this could pose to their future financial performance. British Parliament Committee demanded the government to support binding national renewable energy targets for European Union member states. The Bank of England's financial policy experts should take advice from the Committee on Climate Change to monitor the risks to financial stability. 
Overall the main cause for the Carbon Bubble can be summed up in the following: there won't be a peak in fossil fuels production rather there will be a peak in fossil fuel consumption. This means that a considerable amount of fossil fuels will remain in the ground.
Cheaper clean energy
The price of renewable energy is continually dropping. Currently new wind power is cheaper than new coal and gas power in Australia and USA also the electricity produced from a photovoltaic roof system is cheaper than the electricity from the grid in many countries and places in the world.
Government action on climate change
In order to prevent "dangerous" Climate Change world governments should limit the concentration of atmospheric CO2 to around 350 ppm; this basically means that huge amounts of fossil fuels must stay in the ground.
Real pollution control
Fossil fuels are known for their huge negative externalities or hidden costs. Tackling this market failure will make alternative energies more competitive and will reduce the consumption of fossil fuels.
Cancellation of government energy subsidies
According to IMF governments around the world gave $523 billion direct subsidies for fossil fuels in 2011. If a Carbon Tax of $25 per ton of CO2 is included the subsidies total $1.9 trillion only for 2011. Removing fossil fuels subsidies will further reduce their consumption and make the alternative energies even more competitive.
Renewable corporations lobbying
As the penetration of the renewable energy increases so will the wealth of the renewable energy corporations. This and the increasing number of employees in the renewable energy sector will inevitably transform into political lobbying against fossil fuels.
Switching to electricity based transportation like electrical vehicles from fossil fuel based transportation will reduce the demand for fossil fuels particularly petroleum. Combining roof photovoltaics with second hand EV batteries will further reduce the dependence on fossil fuels as they will provide the needed grid storage for the times when the intermittent renewable energy sources are not producing electricity.
- Harvey, Fiona (6 March 2014). "'Carbon bubble' poses serious threat to UK economy, MPs warn". The Guardian. Retrieved 6 March 2014.
- Golden, Mark (9 July 2013). "Stanford researchers say 'peak oil' concerns should ease". Stanford Report.
- Randall, Tom (18 November 2013). "Oil's Future Draws Blood and Gore in Investment Portfolios". Bloomberg.
- Church Dropping Fossil Fuel Investments, The New York Times, 3 July 2013
- Oral Evidence Taken before the Environmental Audit Committee, House of Commons Environmental Audit Committee, 26 June 2013
- Preventing a carbon bubble crash, ABS, 13 May 2013
- The Economic Case for Divesting from Fossil Fuels, Renewable Energy World, 15 May 2013
- Paton, James (7 February 2013). "Australian Wind Energy Now Cheaper Than Coal, Gas, BNEF Says". Bloomberg.
- Chen, Allan (6 August 2013). "New Study Finds that the Price of Wind Energy in the United States Is Near an All-Time Low". Lawrence Berkeley National Laboratory.
- German PV drops to 15 cents max, Renewables International, 2 May 2013
- Revkin, Andrew C. (2 May 2013). "On ‘Unburnable Carbon’ and the Specter of a ‘Carbon Bubble’". The New York Times.
- Malone, Scott (16 February 2011). "Coal's hidden costs top $345 billion in U.S.: study". Reuters.
- Wong, Edward (21 March 2013). "As Pollution Worsens in China, Solutions Succumb to Infighting". The New York Times.
- EWEA Blog: Global fossil fuel subsidies amount to $1.9 trillion – IMF, EWEA, 5 April 2013
- IMF Calls for Global Reform of Energy Subsidies: Sees Major Gains for Economic Growth and the Environment, IMF, 27 March 2013
- Poole, Lauren (9 May 2013). "Beyond the PTC – Wind Energy's Future". Renewable Energy World.
- “Peak Oil” Less A Concern As Alternatives Reduce Demand, Cleantechnica , July 23rd, 2013
- GM, ABB Demonstrate Chevrolet Volt Battery Reuse Unit, General Motors, November 11, 2012