Assignment
The issues
Response of financial markets to unburnable carbon
There is an incompatibility between current stock market valuation of the fossil fuel industry, which is based on known and projected fuel reserves, and governmental commitments to prevent a rise in global average temperature of more than 28C above pre-industrial levels [21]. It has been suggested that the carbon budget from 2013 through 2050 should not exceed approximately 600- 900 Gt CO2 for the probability of a >28C temperature increase to remain 20% [21-23]. By comparison, the carbon embedded in the known global coal, oil, and natural gas reserves amounts to 2860 Gt CO2. Reliable reserves held by companies listed on stock exchanges around the world already amount to 762 Gt CO2. Nonetheless, the industry invests approximately US$650 billion/yr in exploring new fossil-energy sources and in new extraction methods [21]. For the 200 largest listed companies in the world, these reserves have an estimated market value of US$4 trillion. However, this market value may decline sharply if fossil fuels are not burned because regulations are developed to comply with international agreements on emission limits. If investors and regulators do not address these trade-offs, governments may be forced to choose between preventing further climate change (risking a fi- nancial crisis) or preventing a financial crisis (risking further climate change).
Policy Brief
Response of financial markets to unburnable carbon
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Article: A horizon scan of global conservation issues for 2014 by William J. Sutherland, Rosalind Aveling, Thomas M. Brooks, Mick Clout, Lynn V. Dicks, Liz Fellman, Erica Fleishman, David W. Gibbons, Brandon Keim, Fiona Lickorish, Kathryn A. Monk, Diana Mortimer, Lloyd S. Peck, Jules Pretty, Johan Rockstro ¨ m, Jon Paul Rodri ´guez, Rebecca K. Smith, Mark D. Spalding, Femke H. Tonneijck and Andrew R. Watkinson.