According to an article on the Guardian website the Bank of England Governor has warned that fossil fuel companies will not be able to burn all of the oil in their reserves if we are to avoid a catastrophic climate change.
The article goes on to say that Mark Carney told a World Bank seminar that, “the vast majority of reserves are unburnable” if global temperature rises are to be limited to below 2 deg. C.”
A number of high profile people have also highlighted this “carbon bubble” theory, which warns of the future depreciation of fossil fuel assets. If a realistic carbon reduction target is to be met, then any company that bases it’s worth on the fossil fuel industry could be seeing a dramatic drop in the value of its assets.
Indeed as this blog has previously reported, US philanthropists including the Rockefeller foundation and others have recently sold all of their holdings in fossil fuel investments.
Glasgow University announced that it would become the first university in the UK to sell off all of its shares in companies that produce fossil fuels.
Carney’s stark warning outlines the lack of long term thinking by governments and businesses with respect to this issue, and is a warning that a “tragedy of horizons” may lead to market failure.
The conclusion is that fossil fuel investments will be losing their value, and it will only take a few significant improvements in the technology of renewable energy to see a rapid reduction in the need for fossil fuels. And as sentiment in the market devalues the worth of these investments it will have a self fulfilling effect.
Conversely, the investment into green technology is only increasing with time and investment in renewables is likely to amount to $1.7 trillion worlwide by 2020.
I think I know where I will be putting my money.