The fossil fuel divestment movement is largely a response to a financial analysis done initially in 2012 by the Carbon Tracker Initiative and the Grantham Research Institute.
It can be summarized as follows:
Over the last 150 years humans have released 1,020 gigatons (gt) of carbon into the atmosphere, committing the planet to a one degree rise in temperature. In the first 13 years of this century, humans have added an additional 380 gt of carbon, committing us to a 1.5 increase in temperature. That puts us at 1400 gigatons total. This increase in temperature has led to droughts, flooding, sea rise, greater storm intensity, loss of life and property and so on.
To avoid the worst impact of warming, in 2009 at Copenhagen Summit, the world agreed that the temperature should not exceed 2 degrees Celsius. That can be translated into gigatons of carbon – how much more carbon can be emitted before we exceed 2 degrees. That number is something more than 500 gt for the entire world population. That is our CARBON BUDGET - global emissions need to remain within this carbon budget. If current emissions levels stay the same, the planet's carbon budget will be exhausted by 2024—11 years from now—or even earlier if their upward trend continues. This is a climate crisis.
In 2012, investment analysts began looking at this problem and shared some new information which we take very seriously. Research by Carbon Tracker Initiative showed that just the reserves owned the top 200 companies listed on stock exchanges contain enough carbon to emit more than 762 g of carbon dioxide (262 more than the carbon budget). These publicly traded companies, with privately and state owned reserves (China, Venezuela, Russia, Australia, etc.) together have on their books some 2,800 gigatons, which is 5 times more than our budget.
· Here is one of two new messages - if fossil fuel companies simply carry out their stated mission of selling and burning these existing reserves, what will be the climate impact? All models suggest we will far exceed the 2 degree limit and we may expect global temperature to rise over 5° Celsius.
What would make sense as a business plan here? Looking for more fossil fuel reserves or shifting to a low carbon, renewable energy system? Carbon Tracker learned that these same companies are currently spending 674 billion each year to find and develop yet more reserves. The “easy” or virtually free oil and gas is gone and finding new reserves requires extreme measures – like mountaintop removal, deep sea and arctic drilling, tar sands and fracking. All these unconventional fuels also have higher carbon dioxide emissions rates and are unsellable.
Fossil fuel companies raise money from pension funds, lenders, and investors like us and use the capital to develop more reserves. When we invest, we do so assuming that the fuel will be extracted and lead to the sale of gas, oil and coal, thus generating revenues. Financial analysts began putting two and two together and understood that carbon limits must be introduced to maintain any hope/possibility of a stable climate. When these carbon limits are introduced, that will require that less fuel be consumed and reserves will become what are called stranded or toxic assets that no longer provide returns. They concluded that if companies keep spending at the same level over the next decades, listed companies alone would own more carbon than the budget and that 6.74 trillion dollars of capital expenditure could be wasted developing unburnable reserves.
· So the second new message: They concluded that investors need to know they are being exposed to this CARBON BUBBLE so that their capitol can diverted to low carbon growth.
Resources for this new climate and financial information:
Unburnable carbon 2013: Wasted capital and stranded assets
Carbon bubble will plunge the world into another financial crisis – report
Trillions of dollars at risk as stock markets inflate value of fossil fuels that may have to remain buried forever, experts warn
Original 2012 Report:
Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?http://www.carbontracker.org/carbonbubble
Why can't we quit fossil fuels?