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A '''carbon bubble''' means that the true costs of [[carbon dioxide]] in intensifying [[global warming]] is not taken into account in a company's stock market [[Valuation (finance)|valuation]]<ref name=MPcommittee>{{cite web|url=http://www.theguardian.com/environment/2014/mar/06/carbon-bubble-threat-uk-economy-fossil-fuels-mps |title='Carbon bubble' poses serious threat to UK economy, MPs warn|last=Harvey|first=Fiona|publisher= [[The Guardian]]|date=6 March 2014|accessdate=6 March 2014}}</ref> 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. An estimate made by Kepler Chevreux puts the loss of the fossil fuel companies at $28 trillion over the next two decades.<ref>[http://reneweconomy.com.au/2014/28-trillion-11465 Fossil fuels face $30 trillion losses from climate, renewables], RenewEconomy, 28 April 2014</ref>
A '''carbon bubble''' means that the true costs of [[carbon dioxide]] in intensifying [[global warming]] is not taken into account in a company's stock market [[Valuation (finance)|valuation]]<ref name=MPcommittee>{{cite web|url=http://www.theguardian.com/environment/2014/mar/06/carbon-bubble-threat-uk-economy-fossil-fuels-mps |title='Carbon bubble' poses serious threat to UK economy, MPs warn|last=Harvey|first=Fiona|publisher= [[The Guardian]]|date=6 March 2014|accessdate=6 March 2014}}</ref> 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. An estimate made by Kepler Chevreux puts the loss of the fossil fuel companies at $28 trillion over the next two decades.<ref>[http://reneweconomy.com.au/2014/28-trillion-11465 Fossil fuels face $30 trillion losses from climate, renewables], RenewEconomy, 28 April 2014</ref>
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.<ref name=MPcommittee />
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 the [[government of the United Kingdom]] and Bank of England of the risks of the carbon bubble in 2014.<ref name=MPcommittee />


== Value ==
== Value ==

Revision as of 07:05, 23 July 2014

Carbon Bubble according to data by the Carbon Tracker Initiative 2013.

A carbon bubble means that the true costs of carbon dioxide in intensifying global warming is not taken into account in a company's stock market valuation[1] 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. An estimate made by Kepler Chevreux puts the loss of the fossil fuel companies at $28 trillion over the next two decades.[2]

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 the government of the United Kingdom and Bank of England of the risks of the carbon bubble in 2014.[1]

Value

Author Bill McKibben has estimated that to sustain human life in the world up to $20tn worth of fossil fuel reserves will need to remain in the ground, essentially worthless.[3] British Stern report in 2006 stated that the benefits of strong, early action to decrease the use of oil, coal and gas considerably outweigh the costs. Fossil fuel contributors, the building industry, and land use practices ignore the responsibility of the external costs and ignore the Polluter pays principle according to which climate change costs will be paid by historical climate polluters.

History

Carbon bubble appears to be a recent term. A search of English books on Google Ngram revealed no instances of this term.[4]

The term "carbon bubble" was popularized by the Carbon Tracker Initiative. It published key reports in July 2011 and April 2013:

Perhaps the most widely read popular media article on this subject "Global Warming's Terrifying New Math" was written by Bill McKibben and published in Rolling Stone magazine in July 2012.

Prevention

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.[1]

According to Christiana Figueres, UNFCCC, companies have a duty to shareholders to move to a low-carbon economy, because of the effects of the carbon bubble.[1]

Probable causes

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.[5][6] This means that a considerable amount of fossil fuels will remain in the ground. This could be due a combination of various factors:

Divestment campaigning

The ongoing fossil fuels Divestment campaign in universities, churches[7][8] and pension funds[9] may contribute to increasing interest in divesting from fossil fuel companies.[10][11][12]

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,[13] China[14] and USA[15] 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.[16]

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.[17]

Real pollution control

Fossil fuels are known for their huge negative externalities or hidden costs.[18] Tackling this market failure will make alternative energies more competitive and will reduce the consumption of fossil fuels.[19]

Cancellation of government energy subsidies

According to IMF governments around the world gave $523 billion direct subsidies for fossil fuels in 2011.[20] If a Carbon Tax of $25 per ton of CO2 is included the subsidies total $1.9 trillion only for 2011.[21] 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.[22]

Electric transportation

Switching to electricity based transportation like electrical vehicles from fossil fuel based transportation will reduce the demand for fossil fuels particularly petroleum.[23] 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.[24]

References

  1. ^ a b c d Harvey, Fiona (6 March 2014). "'Carbon bubble' poses serious threat to UK economy, MPs warn". The Guardian. Retrieved 6 March 2014.
  2. ^ Fossil fuels face $30 trillion losses from climate, renewables, RenewEconomy, 28 April 2014
  3. ^ http://www.tomdispatch.com/archive/175499/
  4. ^ http://books.google.com/ngrams/graph?content=carbon+bubble%2CCarbon+bubble%2CCarbon+Bubble&year_start=1800&year_end=2013&corpus=15&smoothing=3&share=
  5. ^ Golden, Mark (9 July 2013). "Stanford researchers say 'peak oil' concerns should ease". Stanford Report.
  6. ^ Randall, Tom (18 November 2013). "Oil's Future Draws Blood and Gore in Investment Portfolios". Bloomberg.
  7. ^ Church Dropping Fossil Fuel Investments, The New York Times, 3 July 2013
  8. ^ World Council of Churches Endorses Fossil Fuel Divestment, 350.org, 11 July 2014
  9. ^ Oral Evidence Taken before the Environmental Audit Committee, House of Commons Environmental Audit Committee, 26 June 2013
  10. ^ Preventing a carbon bubble crash, ABS, 13 May 2013
  11. ^ The Economic Case for Divesting from Fossil Fuels, Renewable Energy World, 15 May 2013
  12. ^ Fossil-free investment portfolios soared 50% in 2013, Responding to Climate Change (RTCC), 15 May 2014
  13. ^ Paton, James (7 February 2013). "Australian Wind Energy Now Cheaper Than Coal, Gas, BNEF Says". Bloomberg.
  14. ^ Parkinson, Giles (21 May 2014). "Solar grid parity – why Australia leads the world". Reneweconomy.
  15. ^ 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.
  16. ^ German PV drops to 15 cents max, Renewables International, 2 May 2013
  17. ^ Revkin, Andrew C. (2 May 2013). "On 'Unburnable Carbon' and the Specter of a 'Carbon Bubble'". The New York Times.
  18. ^ Malone, Scott (16 February 2011). "Coal's hidden costs top $345 billion in U.S.: study". Reuters.
  19. ^ Wong, Edward (21 March 2013). "As Pollution Worsens in China, Solutions Succumb to Infighting". The New York Times.
  20. ^ EWEA Blog: Global fossil fuel subsidies amount to $1.9 trillion – IMF, EWEA, 5 April 2013
  21. ^ IMF Calls for Global Reform of Energy Subsidies: Sees Major Gains for Economic Growth and the Environment, IMF, 27 March 2013
  22. ^ Poole, Lauren (9 May 2013). "Beyond the PTC – Wind Energy's Future". Renewable Energy World.
  23. ^ “Peak Oil” Less A Concern As Alternatives Reduce Demand, Cleantechnica , July 23rd, 2013
  24. ^ GM, ABB Demonstrate Chevrolet Volt Battery Reuse Unit, General Motors, November 11, 2012
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