Individual nations cannot avoid the situation by ignoring the Paris Agreement or burying their heads in coal and tar sands
- Jorge Viñuales
Fossil fuel stocks have long been a safe financial bet. With price rises projected until 2040* and governments prevaricating or rowing back on the Paris Agreement, investor confidence is set to remain high.
However, new research suggests that the momentum behind technological change in the global power and transportation sectors will lead to a dramatic decline in demand for fossil fuels in the near future.
The study indicates that this will now happen regardless of apparent market certainty or the adoption of climate policies – or lack thereof – by major nations.
Detailed simulations produced by an international team of economists and policy experts show this fall in demand has the potential to leave vast reserves of fossil fuels as “stranded assets”: abruptly shifting from high to low value sometime before 2035.
Such a sharp slump in fossil fuel price could cause a huge “carbon bubble” built on long-term investments to burst. According to the study, the equivalent of between one and four trillion US dollars could be wiped off the global economy in fossil fuel assets alone. A loss of US$0.25 trillion triggered the crash of 2008 by comparison.
Publishing their findings in the journal Nature Climate Change, researchers from Cambridge University (UK), Radboud University (NL), the Open University (UK), Macau University, and Cambridge Econometrics, argue that there will be clear economic winners and losers as a consequence.
Image: Energy
Credit: Rich
Reproduced courtesy of the University of Cambridge