Update: February 2014
Tracking down carbon
Simon Birch reports on a group that’s highlighting the links between big banks and big oil.
If we’re going to stop the planet frying then we’ve got to drastically cut the amount of fossil fuels that we all use. It’s not rocket salad is it?
But what about cutting the amount of fossil fuels that we dig up out of the ground in the first place? If we focus on cutting the supply of new oil and gas and how the companies that supply this are funded by the world’s financial markets, then this will give us another weapon in the battle against climate meltdown.
This is the big idea behind Carbon Tracker, an increasingly influential London-based initiative that’s taking a new way of looking at the issue of climate change and carbon emissions.
“Existing global warming campaigns and initiatives were all focused on reducing demand for fossil fuels as opposed to cutting their supply,” says Mark Campanale, the co-founder of Carbon Tracker, explaining the background to its launch in 2009.
“We wanted to shine a spotlight on the role that the financial markets were playing in making it easy for fossil fuel businesses to raise money to fund new oil and gas exploration.”
Despite being a small operation, Carbon Tracker has been making a big impact globally with its ground breaking research. Last year the group released a report which warned that up to 80% of all fossil fuel reserves owned by the big oil and gas companies would have to stay in the ground and remain unburned if politicians stick to their agreed carbon emission targets.
“Our survey found that 200 oil and gas exploration companies invested £440bn in 2012 chasing more coal, oil and gas,” says Campanale.
This investment in the ports, pipelines and oil rigs needed for oil and gas exploration is currently viewed as assets by the banks and financial institutions that are helping to fund this exploration.
The huge risk for the fossil fuel companies and banks is that these assets may become liabilities if global carbon emission targets are met, with the result that their investments would become worthless.
This in turn would lead to massive market losses and trigger a major global economic crisis.
Already banks are starting to wake up to the potential dangers of these risks. Last year analysts at HSBC warned that giant oil and gas companies including BP, Shell and Statoil could face a loss in
market value of up to 60% should the international community reach its agreed carbon emission targets. The credit rating agency, Standard and Poor’s, has also weighed in by saying that if the world got serious about cutting carbon emissions then the business model for tar sands companies would become invalid.
And in what was seen as a significant move, last July the Norwegian state pension fund, the world’s biggest, took the decision to disinvest from a large number of coal and tar sands companies because it believes that in the future these stocks will be “financially worthless”.
“Smart investors can already see that most fossil fuel reserves are essentially unburnable because of the need to reduce emissions in line with the global agreement by governments to avoid global warming of more than 2°C,” says Lord Stern, Chair of the Grantham Research Institute on Climate Change and the Environment which co-authored last year’s Carbon Tracker report.
“They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision.”
Carbon Tracker is now campaigning for regulators to force energy companies to disclose the potential carbon emissions embedded in their fossil fuel reserves in order to inform potential and existing investors. Many of these existing investors are big pension funds which are paid into by ordinary working people whose pensions are at risk if a crash takes place.
Mark Campanale is now encouraging members of pension funds to sign up to the Shareholder Action campaign which aims to make pension funds more aware of their climate change responsibilities.
“Pension funds have a duty to pay benefits to their members,” says Campanale, “but they don’t have to destroy the planet in the process.”
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