Inside the new intergovernmental climate assessment is a number that could fundamentally alter the structure of the global economy
Stockholm, Sweden – The Intergovernmental Panel on Climate Change report that is set to be released this Friday will provide a stark new picture of how global warming is already altering the environment. It is also likely to include a single number that could have dramatic ramifications for the global economy and its most profitable industry: fossil fuel companies.
The number in question is the world’s carbon budget, the number of gigatons of carbon dioxide that the humans can emit and still keep global warming below 2°C, a global target that nearly every country on Earth, including the United States, has agreed to meet.
Last spring, the Carbon Tracker Initiative out of London, UK issued a report that put the carbon budget at 565 gigatons to give the world an 80 percent chance of sticking below 2°C temperature rise. In 2011, the International Energy Agency came to a similar conclusion, staking the carbon budget at around 679 gigatons for a 75 percent chance keeping the global average temperature increase to 2°C. (1)
No matter how you cut it, the budget is insufficient for the amount of time based on business as usual (or even something slightly better than business as usual). It is expected that the IPCC will issue their own estimate in this Friday’s report.
Regardless of the final number, the idea of a carbon budget could have profound implications for the global economy. That’s because the fossil fuel industry has over 2,795 gigatons of carbon dioxide stored in their known reserves of coal, oil and gas, or far more than any carbon budget suggested thus far. In its report last spring, the IEA estimated that in order to stay within the budget, fossil fuel companies must leave 60-80 percent of their reserves underground, resulting in a massive write-off and potential loss in value.
“There is a global limit on a safe level of emissions,” former Irish President and UN High Commissioner for Human Rights, Mary Robinson, told the Guardian earlier this week. “That means major fossil fuel reserves must be left in the ground. That has huge implications for economic and social development.” (2)
Robinson’s statements echoed similar warnings from Lord Nicholas Stern, who partnered with the Carbon Tracker Initiative this summer to issue a report warning of a “carbon bubble” that could amount to trillions of dollars.
“The financial crisis has shown what happens when risks accumulate unnoticed,” said Lord Stern, a professor at the London School of Economics, said at the time. He told the Guardian, the risk was “very big indeed” and that regulators and investors were failing to address it. (3)
If Friday’s IPCC report includes a specific value for the carbon budget, especially if that value is below 500 Gtc, the news will help thrust the idea of a carbon bubble further into the mainstream economic debate. As the Wall Street Journal wrote in May 2013, “A few months ago, the concept of a carbon bubble went mainstream.” (4)
The inclusion will also add significant momentum to the growing movement to divest public institutions from the fossil fuel industry. Environmental writer Bill McKibben and his organization 350.org launched the campaign last fall and the movement has spread to over 300 colleges and universities and 100 cities and states in the United States, Australia, and Canada. Over 15 cities, six colleges, and numerous religious institutions, including the entire United Church of Christ, have already committed to dump their fossil fuel holdings.
“Not only is fossil fuel a rogue industry, it’s also bad bet,” wrote McKibben in the Daily Beast on September 21. “Those carbon numbers make clear that the industry sits on a bubble, with $20 trillion worth of fuel it can’t sell if the planet ever takes even minimal action against climate change.”
McKibben will head to Europe for a five city tour this October 22 to help launch the fossil fuel divestment movement there. A few weeks later, 350.org and its partners will be working to raise the issue of the carbon budget and the need for divestment at the United Nations climate talks in Warsaw, Poland.
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1. Other estimates for the carbon budget have ranged from 225 gigatons (for listed fossil fuel companies, assuming proportional allocation based on reserves) to 900 gigatons of CO2 (based on an assumption that society will be able to control other sources of greenhouse gas emissions, such as methane.
2. http://www.theguardian.com/environment/2013/sep/23/fossil-fuel-reserves-left-in-ground
3. http://www.theguardian.com/environment/2013/apr/19/carbon-bubble-financial-crash-crisis