Ancient ice cores, drilled from the thickest glaciers in the
Arctic, allow you to examine the atmosphere from thousands of years ago when
the ice was last water, by analysing the gases contained in the bubbles trapped
in the ice. It’s the carbon content scientists are particularly
interested in – they’re looking for carbon bubbles, and they’re willing
to go to the ends of the earth, quite literally, to find them.
But there’s another type of carbon bubble which is even more
important in the climate debate, and so far we’ve been doing our utmost to
ignore it. This week that began get more difficult.
The Guardian has been a carbon aero this week, absolutely
jam-packed with carbon bubble stories. After Duncan Clark’s excellent piece on
the issue yesterday, Damian Carrington followed up by putting carbon tracker’s
new report on the carbon bubble on their front page today. Carbon tracker’s
report is very important, because of the rigor of the research and the
mainstream respectability of the people who produced it. But it’s telling us
something we’ve been told before. Greenpeace first reported on it in 1995, but the issue started really bubbling with Bill McKibben’s much cited article ‘Global warming’s
terrifying new math’.
In case you’re one of the majority who’ve managed to
successfully avoid learning about the carbon bubble, here’s a summary:
We need to limit temperature rise and, rightly or wrongly,
the world has accepted the figure of two degrees as the limit we need to
observe. This temperature limit corresponds to an emissions limit – there’s
only so much CO2 and CO2 equivalents which we can emit and still stay under
that two degree limit.
And that emissions limit corresponds to a fossil fuel limit. We can only burn a certain amount of coal, oil and gas and still stay on
target for what the international community have agreed is an acceptable level
of climate change (certain low-lying members of that community have concerns
over the two degree limit’s safety, whilst others think we may already be too
late to hit that target, but two degrees remains pretty much the only game in
town at the international negotiations).
We have a fossil fuel ration, and we need to avoid exceeding
that ration if we’re going to meet any of our targets and avoid runaway
This is where the bubble comes in.
The ration is about 20% of our current known reserves of oil, gas and coal. There
are more conservative commentators claiming it might be 30%, or perhaps 35%, but
no-one in the field disputes that it’s less than half of our reserves. Reserves
are fossil fuels we’ve already located and quantified, so we’re not talking
about 20% of the fossil fuels potentially available, but 20% of the fossil fuels which have already been proven by fossil fuel companies and governments. Reserves are current
assets, not potential assets.
Which means that somewhere between 60% and 80% of those
assets aren’t actually assets, and we‘ve spent many hundreds of billions
locating substances which are worthless stranded assets at best, and huge and
hazardous liabilities should they ever be burnt. The
destruction they would wreak should we try to burn them all would mean we could run out of humans before we ran out of fuel, but if we’re serious
about survival, we will institute laws to prevent most of that fuel being
burned - that’s what all of our leaders and politicians claim, even if they
don’t seem to be in much of a hurry to make it happen.
But fossil fuel companies, particularly the International
Oil Companies (IOCs) are valued primarily on their reserves, and many
oil-producing nations are similarly economically dependent. This is why they
spend so much on exploration to increase those reserves - almost $700 billion
last year alone.
So, the bubble, like all financial bubbles, is the
over-valuation, which is about 80% of the value of the world’s fossil fuel
companies, public and private. That’s about 80% of half of the top twenty
biggest companies in the world, not including state oil companies such as Saudi
Aramco, valued at $10,000,000,000,000. Ten trillion here, ten trillion there,
pretty soon you’re talking real money.
Of course, the big fossil fuel companies know all about
this, but it’s not a problem for them in the short term so long as investors
decide to ride the bubble to its inevitable conclusion, in the hope that they can
bail out just as the price peaks (most bubbles are essentially investors
playing chicken). In order for the fossil fuel companies to keep inflating the bubble and maintain the
illusion of their market value, they have to protect a ‘business as usual’
version of the future and therefore spend money to keep increasing their
reserves, as though there will always be demand for everything they find.
And as the easily accessible oil has either already been exploited
already, or is under the control of the national oil companies in the Middle
East, Latin America or or Russia, they’re pushing into tar sands, fracking,
deep water and Arctic drilling.
What does this mean for the Arctic? Shell, Gazprom and their
peers are willing to destroy one of our planet’s last wildernesses to gain
access to a resource which may be the last nail in the coffin of a habitable
climate, but is far more likely to be a hugely expensive stranded asset.
One of the Oil and Gas analysts at the carbon tracker report
launch made a truly revolutionary suggestion
yesterday. In light of the size of the carbon bubble, it is now time for
the oil companies to shrink rather than grow. They could be doing a
real favour for the climate, but also for their investors.
Concerned about fossil fuel companies destroying your
pension along with the planet? Ask your pension fund how they’re planning to
protect you against the carbon bubble, and join our global day of action to
save the Arctic tomorrow.