tag:theconversation.com,2011:/fr/topics/carbon-bubble-9486/articlesCarbon bubble – The Conversation2023-12-20T19:56:51Ztag:theconversation.com,2011:article/2196342023-12-20T19:56:51Z2023-12-20T19:56:51ZMeasuring the invisible: the tough job of calculating the carbon stocks and fluxes of a forest<figure><img src="https://images.theconversation.com/files/564820/original/file-20230904-21-onpqo.JPG?ixlib=rb-1.1.0&rect=55%2C20%2C4545%2C3387&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Carbon fluxes between the forest and atmosphere in Gabon.
</span> <span class="attribution"><span class="source">Nicolas Barbier </span>, <span class="license">Fourni par l'auteur</span></span></figcaption></figure><p>“Green lungs” is the term often used to describe rainforests due to their ability to use photosynthesis to capture CO<sub>2</sub>, the planet’s primary greenhouse gas. That makes them a key component of global climate regulation, and their preservation represents a major issue for decision-makers and citizens alike. But calculating how much carbon such forests store and the flows they represent into the planet’s overall greenhouse gas balance is no easy feat. In fact, it is one of the segments where our knowledge remains most limited - even the carbon stocks and flows of the oceans are easier to quantify.</p>
<p>The stakes are colossal, however. To prevent future scandals around conserving ecosystems that are reputed to be carbon sinks, we need reliable, independent measuring and monitoring systems. Otherwise, each country and stakeholder can take all the credit for themselves, come up with definitions and measurements that best suit their interests, and pay no heed to reality or the evolution of forest ecosystems.</p>
<p>Forest carbon stocks are not a cryptocurrency; they are a tangible physical quantity, but one that proves tricky to measure. </p>
<p>So how has this been done until now, and how have people gone about measuring these carbon stocks and flows that spark such fervent - and at times opportunistic - interest?</p>
<h2>The forest inventory</h2>
<p>It all starts in the forest with the tried and tested methods of the woodcutter, as used by the forest industry to compute volumes of harvestable timber. Because carbon makes up half of the total dry mass of green plants, specifically trees, quantifying the total stock of this element means coming up with an estimate for the volume of each tree and identifying its species. The species is important because this is what helps determine wood density and, ultimately, the amount of carbon stocked per volume of wood.</p>
<p>Obviously, the number of species found in one rainforest can be so huge that not a single expert in the world could name every one of them. While temperate Europe contains only 124 tree species, there are at least 40,000 growing in the tropics, with some estimates <a href="https://www.pnas.org/doi/10.1073/pnas.1423147112">putting this number at more than 53,000</a>. As such, researchers must systematically compile plant collections to serve as benchmark test material, checking whether a tree belongs to a given species by looking at existing samples from museums and universities. </p>
<p>Next, to assess the evolving carbon stock – which is to say the carbon flowing in and out of the forest – measurements must be taken regularly to calculate tree growth, count dead specimens and include shrubs that are tall enough to be categorised as trees.</p>
<h2>Forest inventory</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three photos of men climbing trees to measure their size" src="https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=318&fit=crop&dpr=1 600w, https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=318&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=318&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=399&fit=crop&dpr=1 754w, https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=399&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/546168/original/file-20230904-17-jduqa5.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=399&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">For some measurements, researchers are required to climb trees, as Pierre Ploton can be seen doing in Cameroon, in the photograph to the left. Measuring the diameter of a misshapen tree can also be a somewhat acrobatic manoeuvre.</span>
<span class="attribution"><span class="source">Vincent Droissart et Nicolas Barbier</span>, <span class="license">Fourni par l'auteur</span></span>
</figcaption>
</figure>
<p>To make the challenge even more daunting, tropical forests are - still - vast, dense, difficult to access and located in countries with poor infrastructure. Even when all goes well, the site to be inventoried will require at least several days’ travel from the capital. Of course, it would be impossible to measure the whole forest; instead, a sample is taken, just like for an electoral survey. Typically, researchers select a number of fairly large tracts of land (ideally equivalent to the size of two football pitches, i.e., between 500 and 1,000 trees per tract).</p>
<p>The selection criteria constitute a whole science in themselves (whether the sample is totally random or chosen from among specific vegetation types), and modifying the criteria halfway through the process can render the entire task null and void. Researchers speak of “majestic forest” bias, for instance, when tracts are selected in unusually intact forests to estimate the average carbon content for all the forests in a given region.</p>
<p>Simple measurements are taken on site, including trunk diameter and, more rarely, tree height. Next, researchers draw up conversion tables known as allometric equations, which use these few measurements to estimate how much carbon a tree contains. The equations are created through felling and weighing a small number of trees. Given that the wet mass of just one of these giants can reach up to 160 tons and that it must be weighed directly in the forest, it can take a dozen workers a whole week to weigh a single tree.</p>
<figure class="align-center ">
<img alt="Destructive weighing of a sample tree " src="https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/546173/original/file-20230904-27-zt2br3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Destructive weighing of a sample tree.</span>
<span class="attribution"><span class="source">Nicolas Barbier</span>, <span class="license">Fourni par l'auteur</span></span>
</figcaption>
</figure>
<p>Consequently, it is common to use equations from other regions, which can lead to bias. There are alternatives being developed that do not harm the forest, such as laser scanners, which can now measure the precise volume of standing trees. These methods have helped us produce new allometric equations in Cameroon and the Democratic Republic of Congo, both much more efficiently and without compromising on accuracy.</p>
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<hr>
<h2>How can this be applied on a large scale?</h2>
<p>Even with sampling, there are still considerable challenges involved in remeasuring sites to obtain reliable, up-to-date estimates of the carbon stocks and fluxes of an entire country or of all rainforests. Recent decades have seen the development of remote measuring techniques (known as remote sensing) for more efficient sampling that is less vulnerable to unpredictable conditions on the ground. Satellites scan the globe, taking daily measurements to measure surface status changes, rainfall and water currents, among other values.</p>
<p>Space missions have been set up specially to measure forest biomass, such as ESA’s <a href="https://www.esa.int/Applications/Observing_the_Earth/FutureEO/Biomass">BIOMASS mission</a>, which is currently awaiting a reliable launcher for take-off, or the GEDI laser on the International Space Station. In the meantime, we will have to keep extrapolating data from existing satellites, which are not necessarily designed for inspecting dense forest canopies.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/546176/original/file-20230904-15-trhz0g.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Infrared satellite image mosaic of the entire region of Central Africa (MODIS satellite, ten years of observation).</span>
<span class="attribution"><span class="source">Nicolas Barbier</span>, <span class="license">Fourni par l'auteur</span></span>
</figcaption>
</figure>
<p>This is because remote sensing does not measure carbon or biomass directly, but rather a quantity of light or radio waves reflected by the objects in question. Complex physical or statistical models must be established to convert the raw data into actionable information, which is why it is vital to gather field data. Due to the scarce data and limited satellite signals currently at our disposal, the average for a country <a href="https://www.cifor.org/publications/pdf_files/Books/SOF-2021-01.pdf">can almost double from one map to the next</a>. Over the last decade, our team has spent many hours analysing the sources of these errors, which are sometimes hidden behind poor statistical approaches or poorly recorded instrumental effects.</p>
<p>For instance, images cannot be compared directly if they are taken in varying light conditions or atmospheres. Due to the permanent cloud cover near the Equator, we can even be constrained to using very poor-quality images or pixel composites amassed from a variety of images.</p>
<p>However, it is not enough to design supercomputers and launch space missions. Reinvesting in data acquisition on the ground is also vital in order to provide essential reference information. <a href="https://geo-trees.org/">International initiatives are being devised</a> to support national forest inventories (as seen above) or set up state-of-the-art calibration sites to serve as a reference for satellite missions.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/546177/original/file-20230904-17-5pa2ym.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Stéphane Momo laser-scans a forest in Gabon.</span>
<span class="attribution"><span class="source">Nicolas Barbier</span>, <span class="license">Fourni par l'auteur</span></span>
</figcaption>
</figure>
<h2>What about other segments?</h2>
<p>If assessing carbon stocks in the visible parts of standing trees is difficult enough, very little is known about these trees’ roots and the carbon contained in soil, or about the amount that is carried away by rivers or absorbed into the atmosphere. For example, the peat bogs of the Congo basin were recently found to contain <a href="https://www.nature.com/articles/nature21048">more carbon than all the forests in that same region</a>.</p>
<p>To measure the overall respiration and photosynthesis of the planet’s famed “green lungs”, we must erect flux towers. Looking out over the tree canopy at around 60 metres in height (and sometimes more than 300), these structures are fitted with devices with names like “sonic anemometer,” “infrared CO<sub>2</sub> analyser” and “hygrometer”, that measure gas exchanges between the atmosphere and the forest. It is a challenge in and of itself to power, maintain and secure such a facility over several decades. A team of fellow researchers attempted this feat in the Congo in the 1990s. When they returned, the tower’s aluminium cladding had been melted down and used to make pots.</p>
<p>Few realise that, in spite of the climate crisis, there is basically no measuring infrastructure left in good working order in Africa. There is even a shortage of <a href="https://www.sciencedirect.com/science/article/abs/pii/B9780128159989000075">basic facilities, such as weather stations</a>. This dearth of material prompts some deeper questions: who should be tasked with gathering all the essential data – government bodies in the Global South, private industrial operators, research agencies in the Global North? <a href="https://www.ird.fr/transfert-de-connaissances-et-initiation-de-nouvelles-collaborations-avec-lecole-nationale-des-eaux">For our part</a>, we advocate collaboration between researchers and scientific institutions from both of these regions, as this would enable us to learn together by benefiting from the best technology available. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1316696342492839938"}"></div></p>
<h2>What is the end goal?</h2>
<p>Science is doing its best to make more pertinent measurements of rainforest carbon stocks and fluxes. In time, this should help avoid repeating errors, whether careless or deliberate, such as those from <a href="https://www.washingtonpost.com/climate-environment/interactive/2021/greenhouse-gas-emissions-pledges-data/">Malaysia</a>, which made global headlines in 2021, when the country’s annual greenhouse gas balance claimed an annual forest carbon sink of over 243 million tons – equal to the amount in neighbouring Indonesia, which has five times as much forest land.</p>
<p>But while some countries publish exaggerated figures, others do not even bother. With <a href="https://theconversation.com/pourquoi-les-temperatures-pourraient-battre-des-records-au-cours-des-prochains-mois-210935">some researchers</a> already worried that we will have exceeded the 1.5°C limit set by the Paris Agreement by the end of 2023, the lack of data around greenhouse gas fluxes, stocks and emissions remains particularly alarming. <a href="https://www.polytechnique-insights.com/tribunes/planete/comprendre-les-emissions-mondiales-de-gaz-a-effet-de-serre/">At the start of the year</a>, only 48 countries had published an inventory of their greenhouse gases. This is tiny when we consider the fact that, starting in <a href="https://unfccc.int/sites/default/files/resource/ETF_Handbook-first_edition_June_2020-FR.pdf">2024</a>, the 197 member countries of the United Nations Framework Convention on Climate Change will be obliged to submit an annual report on this topic.</p>
<p>Rigorous measurements of carbon fluxes and stocks are also crucial to assessing the impact of conservation projects in forest ecosystems. Such measurements are especially important in the case of monetisation using carbon credits, as is the case for projects to avoid deforestation or promote reforestation. Once again, we must avoid falling into the same traps of recent decades, which have seen many forest conservation projects fail to produce any real, positive impact.</p>
<hr>
<p><em>This article is part of a project between The Conversation France and AFP Audio, supported financially by the European Journalism Centre, as part of the Bill and Melinda Gates Foundation “Solutions Journalism Accelerator” <a href="https://ejc.net/news/the-second-group-selected-in-the-solutions-journalism-accelerator-programme">“Solutions Journalism Accelerator”</a> initiative. AFP and The Conversation France have maintained their editorial independence at every stage of the project.</em></p><img src="https://counter.theconversation.com/content/219634/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pierre Ploton and Nicolas Barbier are members of UMR AMAP. Pierre Ploton, Nicolas Barbier and Bonaventure Sonké are members of the Laboratoire Mixte International (LMI) DYCOFAC.</span></em></p><p class="fine-print"><em><span>Bonaventure Sonké, Le Bienfaiteur Sagang, Pierre Ploton et Stéphane Momo Takoudjou ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur poste universitaire.</span></em></p>Depending on the methods used, the measurement of forest carbon can vary by as much as 100%.Nicolas Barbier, Chercheur en Écologie Tropicale à l'UMR AMAP, Institut de recherche pour le développement (IRD)Bonaventure Sonké, Professeur de Botanique, Université de Yaounde 1Le Bienfaiteur Sagang, Écologiste et analyste en télédétection, University of California, Los AngelesPierre Ploton, Chercheur en Sciences des données et des modèles à l'UMR AMAP, Institut de recherche pour le développement (IRD)Stéphane Momo Takoudjou, Chercheur en Écologie tropicale, Université de LiègeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/881472017-12-10T23:00:10Z2017-12-10T23:00:10ZHow divesting of fossil fuels could help save the planet<figure><img src="https://images.theconversation.com/files/198232/original/file-20171207-11335-1l3pcpr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A polar bear walks over sea ice floating in the Victoria Strait in the Canadian Arctic Archipelago in July 2017. Research suggests that divesting in fossil fuels could help nations meet their climate change goals. </span> <span class="attribution"><span class="source"> (AP Photo/David Goldman, file)</span></span></figcaption></figure><p>Recently, a number of institutional investors, including <a href="http://nationalpost.com/pmn/news-pmn/why-canadian-pension-plans-must-divest-of-fossil-fuel-investments">Caisse de dépôt et placement du Québec</a> in Canada and <a href="https://www.nytimes.com/2017/11/16/business/energy-environment/norway-fund-oil.html">Norway’s sovereign wealth fund</a>, announced their intent to reduce their exposure in investments linked to fossil fuels.</p>
<p>The announcements show that investors withdraw their funds to either mitigate financial risks or for ethical reasons. But the question remains whether divestment and divestment announcements have a financial impact on the share price of fossil fuel companies. </p>
<p>We’re a team of researchers at the School of Environment, Enterprise and Development (SEED) at the University of Waterloo. We recently conducted an analysis that suggests divestment announcements have a statistically significant negative impact on the price of fossil fuel shares. Our study aggregates the impact of more than 20 announcements across 200 publicly traded fossil fuel companies. </p>
<p>The results suggest that share prices dropped on the days that institutional investors announced they were divesting of fossil fuels.</p>
<p>We’ve concluded that investors, and the market as a whole, perceive divestment as integral to the long-term valuation of the fossil fuel industry. Lower share prices increase the costs of capital for the fossil fuel industry, which in turn decreases their ability to explore new resources and exploit proven resources. </p>
<p>And if the majority of proven reserves remains in the ground, we may be able to meet our climate change goals.</p>
<h2>Reserves must stay grounded</h2>
<p>The continued exploitation of fossil fuel reserves alone has the potential to increase greenhouse gases and global temperature well beyond the 2°C threshold required to prevent the worst effects of climate change. </p>
<p>To achieve the 2°C target, however, <a href="https://doi.org/10.1038/nature08017">no more than one-fifth of the current proven fossil fuel reserves can be burned</a>.</p>
<p>The necessity to keep the resources in the ground has a direct impact on the valuation of fossil fuel industry assets. They are predominantly influenced not only by production, but also by the value of proven fossil-fuel reserves. In other words, if these resources cannot be exploited, their value will depreciate. </p>
<p>A sudden depreciation would lead to a burst of the so-called <a href="https://www.carbontracker.org/terms/carbon-bubble/">carbon bubble,</a> leaving fossil fuel investments stranded.</p>
<p>To avoid the risk of stranded assets, <a href="https://www.arabellaadvisors.com/wp-content/uploads/2016/10/Measuring-the-Growth-of-the-Divestment-Movement.pdf">a number of influential private and institutional investors</a> have pledged to reduce their fossil fuel investments or divest from the fossil fuel industry entirely. </p>
<h2>Ethical motivations</h2>
<p>Other investors are motivated to divest from fossil fuel shares for ethical reasons. They do not want to be part of an industry that is one of the main drivers of climate change.</p>
<p>To explore the financial impact of divestment announcements on the share price of fossil-fuel sector companies, we analyzed 24 divestment announcements, endorsements and campaign events between 2012 and 2015 (see the list below).</p>
<p>These events received a lot of media coverage, with stories appearing in publications that included the Financial Times and the Wall Street Journal. </p>
<p>Our sample of fossil fuel industry representatives included 200 coal, oil and gas firms listed in <a href="https://fossilfreefunds.org/carbon-underground-200/">Carbon Underground 200</a>, which identifies the top publicly traded companies with the highest potential greenhouse gas emissions based on their reserves.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1127&fit=crop&dpr=1 600w, https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1127&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1127&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1416&fit=crop&dpr=1 754w, https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1416&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/196600/original/file-20171128-2009-16yvk0f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1416&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Divestment announcements, endorsements and campaigns.</span>
</figcaption>
</figure>
<p>A comparison of the share prices of fossil fuel shares and a global benchmark at the time of a divestment announcement suggests significant differences. </p>
<p>While the general benchmark — the MSCI All Country World Index (ACWI) — has not been affected by the announcements, the fossil fuel share prices decreased, as shown below:</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=268&fit=crop&dpr=1 600w, https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=268&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=268&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=336&fit=crop&dpr=1 754w, https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=336&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/197452/original/file-20171203-5381-lyiv2g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=336&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Expected returns and real returns of fossil-fuel industry share prices on event days.</span>
</figcaption>
</figure>
<p>The results suggest that fossil fuel companies experienced statistically significant negative abnormal returns on the day of a divestment announcement, and in the days following the announcement. Furthermore, our findings demonstrate that more recent divestment announcements had a stronger impact on share prices than earlier such announcements, suggesting a snowball effect.</p>
<p>In May 2014, for example, <a href="https://news.stanford.edu/news/2014/may/divest-coal-trustees-050714.html">Stanford University’s divestment announcement</a> resulted in a negative abnormal return of .009 per cent in the ensuing 10 days for companies listed on the Carbon Underground 200.</p>
<p>A few months later, in September 2014, the <a href="https://www.rbf.org/about/divestment">Rockefeller Foundation divestment announcement</a> resulted in a negative abnormal return of -.22 per cent over the following 10 days. And two months after that, the divestment announcement by the <a href="https://www.theguardian.com/environment/2015/mar/16/norways-sovereign-wealth-fund-drops-over-50-coal-companies">Norwegian sovereign wealth fund</a> resulted in -.24 percent for the shares of the companies listed on the Carbon Underground 200. </p>
<h2>Markets respond</h2>
<p>It seems financial markets are increasingly aware of the importance of divestment. </p>
<p>Divestment announcements by prominent investors signal financial risks to the market, which in turn depress share prices. Therefore, divestment announcements can have a measurable impact on the fossil fuel industry.</p>
<p>The market response to divestment can be either direct or indirect. Market players might directly perceive the announcements of big institutional investors as signalling an increased financial risk to the divested industry. If big market players announce that they divest, others follow.</p>
<p>Alternatively, divestment announcements might have an indirect impact on the reputation of fossil fuel companies. Tarnished reputations weaken confidence and trust in the long-term value of these shares and decreases their price.</p>
<p>Whether the impact is direct or indirect, decreasing share prices make acquiring financial capital more expensive for the fossil fuel industry.</p>
<p>This in turn lowers their ability to explore new resources, exploit proven reserves and secure long-term growth. In other words, lowering fossil fuel industry share prices via divestment can lead to lower productive capacity — and, consequently, to lower greenhouse gas emissions.</p><img src="https://counter.theconversation.com/content/88147/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Olaf Weber receives funding from Social Sciences and Humanities Research Council of Canada (SSHRC).</span></em></p><p class="fine-print"><em><span>Truzaar Dordi and Vasundhara Saravade do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Fossil fuel divestment apparently works. Research suggests announcements of divestments have a significant impact on the fossil fuel industry’s share prices.Olaf Weber, Professor of Sustainable Finance and Banking, University of WaterlooTruzaar Dordi, PhD Candidate, Sustainable Finance, University of WaterlooVasundhara Saravade, Masters Candidate in Environmental Finance and Sustainability Management, University of WaterlooLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/810812017-07-27T01:58:05Z2017-07-27T01:58:05ZHow electric vehicles could take a bite out of the oil market<figure><img src="https://images.theconversation.com/files/179831/original/file-20170726-7204-1mm3iwl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sales of electric vehicles are growing fast, especially in Europe.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/free-recharging-station-146626955">Sopotnicki/Shutterstock.com</a></span></figcaption></figure><p>When will cars powered by gas-guzzling internal combustion engines become obsolete? Not as soon as it seems, even with the latest automotive news out of Europe.</p>
<p><a href="https://www.media.volvocars.com/global/en-gb/media/pressreleases/210058/volvo-cars-to-go-all-electric">First, Volvo announced</a> it would begin to phase out the production of cars that run solely on gasoline or diesel by 2019 by only releasing new models that are electric or plug-in hybrids. <a href="http://money.cnn.com/2017/07/06/technology/france-cars-gas-electric-diesel/index.html">Then, France</a> and <a href="https://www.bloomberg.com/news/articles/2017-07-25/u-k-to-ban-diesel-and-petrol-cars-from-2040-daily-telegraph">the U.K.</a> declared they would ban sales of gas and diesel-powered cars by 2040. Underscoring this trend is data from Norway, as electric models amounted to <a href="https://electrek.co/2017/07/04/electric-car-norway-tesla-model-x/">42 percent of Norwegian new car sales</a> in June. </p>
<p><a href="http://www.resilience.org/stories/2015-08-31/europe-oil-consumption-peaked-2005/">European demand for oil</a> to propel its passenger vehicles has been falling for years. Many experts expect a sharper decline in the years ahead as the shift toward electric vehicles spreads across the world. And that raises questions about whether surging electric vehicle sales will ultimately cause the global oil market, which has grown on average by 1 to 2 percent a year for decades and now totals <a href="https://www.iea.org/about/faqs/oil/">96 million barrels per day</a>, to decline after hitting a ceiling. </p>
<p>Energy experts call this concept “peak oil demand.” We are debating when and if this will occur. </p>
<h2>A forecast with caveats</h2>
<p>The International Energy Agency (IEA), which represents 29 oil-importing industrial countries, produces bellwether forecasts that foresee electric cars phasing in slowly. Its baseline projection envisions <a href="https://www.iea.org/publications/freepublications/publication/global-ev-outlook-2017.html">140 million electric vehicles</a> on the world’s roads by 2040, or about 7 percent of all passenger vehicles at that point. In comparison, only two million electric vehicles are operating today – 0.2 percent of the <a href="http://www.greencarreports.com/news/1093560_1-2-billion-vehicles-on-worlds-roads-now-2-billion-by-2035-report">1.2 billion</a> on the road. The IEA estimates this shift will save nearly two million barrels per day of oil, relative to its business-as-usual projection of the world using at least 70 million barrels of oil per day for transportation by 2040. That consumption level would mark a 30 percent increase from roughly 54 million barrels now.</p>
<p>If electric vehicles sales grow faster than the IEA expects, that projection might miss the mark. Should that happen, would global oil demand flatten or decline?</p>
<p>Our research at the Institute of Transportation Studies at the <a href="https://its.ucdavis.edu/blog-post/what-happens-when-demand-for-oil-peaks/">University of California, Davis</a> shows that encouraging electric vehicle purchases is just one way policymakers can help phase out oil consumption – one key to reducing the greenhouse gas emissions that stoke climate change and health-threatening pollution.</p>
<p>Given the dominance of internal combustion engine passenger vehicles, which include cars, SUVs and light trucks, replacing them all with <a href="http://www.sciencedirect.com/science/article/pii/S0301421510002739">electric models</a> will take decades. Automobiles are durable goods that typically remain on the road for 10 to 15 years. Not all drivers will buy a new car, let alone an electric one, soon.</p>
<p>In other words, even if (hypothetically) all new car sales were to instantly turn electric, it would likely be sometime after 2030 before gasoline cars would disappear. Besides, passenger vehicles consume only about 26 percent of the oil used worldwide. Given these stubborn realities and the fact that electric vehicles still represent a tiny portion of new-car sales, reaching a peak in oil demand by 2040 would require more than widespread conversion to electric-powered cars.</p>
<p>But together with other trends taking shape, electric vehicle growth could potentially revolutionize transportation enough for oil consumption to stop growing within this time frame.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=487&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=487&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179839/original/file-20170726-30152-1rjjtiu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=487&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Waymo, the self-driving car company owned by Google’s parent Alphabet, is teaming up with rideshare company Lyft.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/TEC-Waymo-Lyft/09db258a44bb40a788cd104d70065416/7/0">AP Photo/Eric Risberg</a></span>
</figcaption>
</figure>
<h2>Ride-sharing and oil</h2>
<p>Even if all of Europe mandated that only plug-in vehicles could be sold, starting in 2030, and China followed suit by 2035, that wouldn’t bring about peak oil demand by 2040. According to our research, global oil consumption would keep growing until as late as 2050, in part because so many cars and trucks running on gasoline and diesel – especially in developing countries – will remain in use.</p>
<p>To see if oil demand could still peak by the middle of this century, if not sooner, we recently began preliminary research modeling the effect of urban sustainability policies on oil demand in the future. This is an important area of analysis since <a href="https://www.usmayors.org/2017/06/02/mayors-undeterred-by-paris-climate-accord-withdrawal/">U.S. mayors</a> and municipal leaders from around the world <a href="https://apnews.com/fbb2bab100734ec194e4976ae9c17ac4">reaffirmed</a> their commitment to climate-change action after President Donald Trump decided to back out of the Paris climate accord. </p>
<p>Using a set of scenarios regarding potential technological and policy interventions in work we will publish soon, we modeled different future oil market demand conditions. We focused on four major trend lines: vehicle electrification, ride-sharing services like Uber and Lyft, more sustainable freight that runs on alternative fuels or reduces vehicle miles traveled through computer-assisted optimization, and urban car-free zones. </p>
<p>We found that making more car-free pedestrian areas in big cities would make a huge dent in global oil demand. This practice – already common in cities like Copenhagen and Madrid in Europe and Chendu, China – could make oil demand max out by 2030, as long as enough governments aggressively encouraged drivers to switch to electric cars and mandated more fuel efficiency for road-based freight.</p>
<p>Trucks don’t last as long as cars, and many countries are considering policies to encourage the use of <a href="http://www.reuters.com/article/china-lng-transport-idUSL4N0AL6UI20130228">natural gas</a>, <a href="https://www.forbes.com/sites/alanohnsman/2017/04/19/toyota-rolls-out-hydrogen-semi-ahead-of-teslas-electric-truck/#1912e4db582b">hydrogen</a> or <a href="http://www.truckinginfo.com/channel/fuel-smarts/news/story/2017/01/real-world-electric-highway-tests-begin-in-sweden.aspx">electric vehicles</a> for heavy-duty trucking.</p>
<p>Commercial ride-sharing might also pare oil demand by reducing the number of miles driven overall if it encourages carpooling. This industry could, in addition, hasten the shift to electric vehicle dominance if – as widely reported – it begins to rely on a fleet of autonomous (driverless) vehicles, which would <a href="https://www.usatoday.com/story/money/cars/2016/09/19/why-most-self-driving-cars-electric/90614734/">predominantly be electric</a>. </p>
<p>But ride-sharing could fail to reduce fuel demand in the short term if people wind up taking more trips and traveling more miles in passenger cars and relying less on the bus, transit or city train than they used to. Some research suggests that could be happening. For example, scholars at University of California, Berkeley found that a third of the riders they surveyed in San Francisco used these services <a href="http://www.sciencedirect.com/science/article/pii/S0967070X15300627?via%3Dihub">instead of public transportation</a> – not to replace trips in taxis or their own cars.</p>
<p>In short, there is no guarantee that more ride-sharing means we’ll burn less oil.</p>
<h2>What cities can do</h2>
<p><a href="https://its.ucdavis.edu/blog-post/how-to-combine-three-revolutions-in-transportation-for-maximum-benefit-worldwide/">In another study</a>, our team at UC Davis teamed up with the Institute for Transportation and Development Policy, an independent global nonprofit, and modeled three urban transportation policy scenarios. We found that global new vehicle sales in 2040 will total between 600 million, if ride-sharing and transit flourish, and 2.1 billion vehicles, should the ride-sharing industry stall – a huge difference. </p>
<p>Metropolitan policymakers can use other tools. Creating car-free zones, making parking expensive and levying congestion taxes and road usage fees are some examples. </p>
<p>Overall, we believe there is a reasonable chance global oil consumption will peak by 2040. Especially given the growing preference of city dwellers to live in places with <a href="http://www.smartertransport.uk/smarter-cambridge-transport-urban-congestion-enquiry/">less congestion and pollution</a>, a shift away from cars with internal combustion engines – and from cars in general – looks not only likely but inevitable. It also seems fairly likely that <a href="http://oilprice.com/Energy/Oil-Prices/Are-Supermajors-Spooked-By-Peak-Oil-Demand.html">any company betting</a> on the continued growth of oil sales will be disappointed.</p>
<p>Goldman Sachs says the world could pass this milestone sooner. Researchers at the U.S. investment powerhouse predict that with widespread reliance on electric cars, slower economic growth and a decline in (largely petrochemical-based) <a href="https://www.ellenmacarthurfoundation.org/publications/the-new-plastics-economy-rethinking-the-future-of-plastics">plastic production</a>, global oil demand could <a href="http://uk.reuters.com/article/research-crude-goldman-idUKL3N1KF3ER">max out by 2030</a>. </p>
<p>However long it takes, shifting to electric vehicles might not make oil demand level off or decline on its own. But plug-in vehicles, combined with other policies, trends and technologies, will clearly take a toll.</p>
<p><em>This article has been updated to correct the number of electric vehicles the International Energy Agency includes in its baseline scenario.</em></p><img src="https://counter.theconversation.com/content/81081/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amy Myers Jaffe receives funding for research on alternative fuels in the state of California from the California Air Resources Board and California Energy Commission (CEC). She is a researcher at the Institute of Transportation Studies at UC Davis which receives funding from a consortium of automotive and energy companies. She has also contributed to a recently published study by the climate advocacy firm Ceres on the benefits of 2 degrees scenario analysis in the energy industry. </span></em></p><p class="fine-print"><em><span>Some of Lewis Fulton's work relevant to this article has been funded by ClimateWorks and by the STEPS consortium, a funding pool based on grants from a range of corporations and other organizations. There was no direct involvement from any of these foundations, corporations or other organizations in the drafting of this article.</span></em></p>Shifting to plug-in cars wouldn’t be enough to max out global oil consumption by 2040. But it could help make that happen if cities pitch in and ride-sharing doesn’t crowd out public transportation.Amy Myers Jaffe, Executive Director for Energy and Sustainability, University of California, DavisLewis Fulton, Co-director, STEPS (Sustainable Transportation Energy Pathways), University of California, DavisLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/404672015-04-22T19:46:01Z2015-04-22T19:46:01ZUnburnable carbon: why we need to leave fossil fuels in the ground<figure><img src="https://images.theconversation.com/files/78673/original/image-20150421-25701-ivd4lh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Every tonne of coal burnt is a tonne off the carbon budget to keep warming below 2C. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/david_a_lea/6867081026">david_a_l/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>Ninety per cent of Australia’s current coal reserves will need to be left in the ground for Australia to play its role in limiting warming to no more than 2C. That’s according to a report released today by the <a href="https://www.climatecouncil.org.au/">Climate Council</a>, “<a href="http://bit.ly/1J55ce3">Unburnable Carbon: why we need to leave fossil fuels in the ground</a>”.</p>
<p>The new report uses a “<a href="http://theconversation.com/setting-a-carbon-budget-to-keep-below-two-degrees-18841">carbon budget</a>” approach. This figures out how much carbon can be let into the atmosphere while limiting warming to 2C, and is a different method to the “targets and timetables” method favoured by international climate negotiations. These are are highly complex and difficult to interpret and put into practice. </p>
<p>A carbon budget instead shows how much carbon humanity can spend without blowing the budget. And the more we dip into the carbon piggy bank, the more serious climate impacts become. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=801&fit=crop&dpr=1 600w, https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=801&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=801&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1007&fit=crop&dpr=1 754w, https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1007&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/79410/original/image-20150427-18021-18xq5im.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1007&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Climate Council</span></span>
</figcaption>
</figure>
<h2>Time is running out</h2>
<p>Global temperatures have already <a href="http://www.ipcc.ch/pdf/assessment-report/ar5/wg1/WG1AR5_SPM_FINAL.pdf">risen by nearly 1C</a>.
Extreme weather events are set to become <a href="http://theconversation.com/ipcc-australia-and-new-zealand-face-greater-fire-and-flood-risk-damage-to-coral-reefs-24642">significantly worse in Australia</a>. </p>
<p>To track emissions against the warming limit of 2C above the pre-industrial level, the most commonly used method in the policy world is the “targets and timetables” approach. This is often based on a target reduction in greenhouse gas emissions by a certain date or over a specified period. </p>
<p>Examples of targets and timetables include the <a href="http://www4.unfccc.int/submissions/indc/Submission%20Pages/submissions.aspx">United States target</a> of reducing emissions by 26-28% by 2025 against a 2005 baseline and <a href="http://www.dfat.gov.au/international-relations/themes/climate-change/Pages/australias-sixth-national-communication-on-climate-change.aspx">Australia’s target</a> of reducing emissions unconditionally by 5% by 2020 against a 2000 baseline, and conditionally by 15-25% depending on international action.</p>
<p>In practice, the complexity of the targets and timetables approach, especially the number of variations, makes it difficult to compare the level of effort of one country against another and to assess combined international efforts to stabilise the climate system. </p>
<h2>Flipping the carbon coin</h2>
<p>The carbon budget is a scientifically robust, conceptually simple way of estimating how much more CO<sub>2</sub> we can emit to the atmosphere before we raise global temperature above 2C. It gives a single, globally aggregated amount of CO<sub>2</sub> that can be emitted before the world’s economy must be decarbonised. Other greenhouse gases such as methane and nitrous oxide are accounted for in the construction of the budget. </p>
<p>The higher the probability we want of preventing a global temperature rise of 2C, the more stringent the budget. For instance, if we want a 50% chance (the toss of a coin) of limiting warming to 2C, the budget from 2012 is 1112 billion tonnes of CO<sub>2</sub>. </p>
<p>For a 66% chance, the budget is 1,010 billion tonnes of CO<sub>2</sub>. And for a 75% chance, the budget is 672 billion tonnes of CO<sub>2</sub>. If we want a greater than 75% probability of not exceeding the 2C warming limit, the carbon budget drops sharply to values much lower than 672 billion tonnes of CO<sub>2</sub>. </p>
<p>To keep this challenge in perspective, current human emissions of CO<sub>2</sub> are about <a href="http://www.globalcarbonproject.org/global/pdf/LeQuere_2014_GlobalCarbonBudget2014.ESDD-D.pdf">36 billion tonnes per year</a>. At this rate, we would burn through the budget by 2032 if we want a 75% chance of meeting the warming limit.</p>
<h2>What does this mean for fossil fuels?</h2>
<p>From setting a carbon budget we can work backwards to figure out how much coal, oil and gas can be extracted and burned. </p>
<p>An <a href="http://carbontracker.live.kiln.it/Unburnable-Carbon-2-Web-Version.pdf">initial study</a> in 2013 by the Carbon Tracker and Grantham Institute 2013 compared the known global fossil fuel reserves (coal, oil and gas) with the carbon budget. They estimated that if all of the world’s indicated reserves of fossil fuels were burned, 2,860 billion tonnes of CO<sub>2</sub> would be emitted to the atmosphere. This is more than 2.5 times greater than the allowed budget for a toss-of-the-coin chance of succeeding. </p>
<p>Recently, Christophe McGlade and Paul Ekins at University College London examined further the <a href="http://www.nature.com/nature/journal/v517/n7533/full/nature14016.html">implications of the carbon budget for the use of fossil fuels</a>. They used an economic optimisation method: how to gain the most economic value from the limited amount of coal, oil and gas that can be burned, and in what regions. </p>
<p>This analysis, again based on just a 50:50 chance of preventing a 2C rise in global temperature, estimates that 88% of global coal reserves, 52% of gas reserves and 35% of oil reserves are unburnable and must be left in the ground. </p>
<p>Put simply, tackling climate change requires that most of the world’s fossil fuels be left in the ground, unburned.</p>
<h2>Australia’s beached coal whales</h2>
<p>According to the study mentioned above, for Australia to play its role in preventing a 2C rise in temperature requires more than 90% of our coal reserves to be left in the ground unburned. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=533&fit=crop&dpr=1 754w, https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=533&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/45949/original/b42pvsn8-1397024043.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=533&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Australia’s coal resources, including the vast, untapped areas of the Galilee Basin in inland Queensland.</span>
<span class="attribution"><a class="source" href="http://www.ga.gov.au/corporate_data/74097/74097.jpg">Geoscience Australia</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Energy policies that continue to support substantial fossil fuel use are inconsistent with tackling climate change. A case in point is the proposed <a href="http://theconversation.com/why-the-galilee-basin-is-worth-worrying-about-10959">coal expansion in the Galilee Basin</a>, which is not viable economically if the carbon budget is respected. The Galilee coal is lower quality and high cost to extract, meaning under a carbon budget limiting warming to 2C other reserves would be more viable, leaving other assets stranded like beached whales. </p>
<p>But there is hope. Limiting global warming to no more than 2C – a <a href="http://cancun.unfccc.int/cancun-agreements/significance-of-the-key-agreements-reached-at-cancun/">goal Australia shares with 194 other countries</a> – can open up opportunities for the Australian economy to prosper. </p>
<p>For example, many of Australia’s coal-fired power plants are inefficient and nearing the end of their lifetimes, while concurrently the costs of renewable energy technologies such as <a href="https://theconversation.com/theres-a-sunny-future-ahead-for-rooftop-solar-power-heres-why-36587">rooftop solar</a> and wind continue to fall. <a href="http://www.climateworksaustralia.org/project/current-project/pathways-deep-decarbonisation-2050-how-australia-can-prosper-low-carbon">Work by ClimateWorks Australia and ANU</a> shows Australia can decarbonise the economy with little or no cost through energy efficiency, low-carbon electricity (renewables, nuclear and carbon capture and storage), and electrification and fuel switching (from petrol to electricity or biofuel). </p>
<p>With the carbon budget rapidly running out, it is urgent that global emissions begin to track downward in the next few years. Ultimately, most of the world’s fossil fuels must be left in the ground, unburned.</p><img src="https://counter.theconversation.com/content/40467/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Will Steffen is a Climate Councillor. The Climate Council is an independent non-profit organisation funded by donations from the public. Its mission is to provide authoritative, expert advice to the Australian public on climate change.</span></em></p><p class="fine-print"><em><span>Martin Rice is the Research Manager of the Climate Council, an independent non-profit organisation funded by donations from the public. Its mission is to provide authoritative, expert advice to the Australian public on climate change.</span></em></p>If we’re going to limit global warming to less than 2C, Australia will need to keep more than 90% of its coal reserves in the ground.Will Steffen, Adjunct Professor, Fenner School of Environment and Society, Australian National UniversityMartin Rice, Research Manager, The Climate Council of Australia and Honorary Associate, Department of Environment and Geography, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/242312014-03-19T06:08:19Z2014-03-19T06:08:19ZFinancial markets should take climate policy more seriously<figure><img src="https://images.theconversation.com/files/44322/original/vjxf3htj-1395238327.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is the city shrouded in a carbon bubble?</span> <span class="attribution"><a class="source" href="http://www.flickr.com/photos/criminalintent/2108478134/">Lars Plougman</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The number of climate change laws on the statue books of the world’s leading economies grew from less than 40 in 1997 to <a href="http://www.globeinternational.org/studies/legislation/climate">almost 500 at the end of 2013</a>. Most leading countries now have legal provisions on renewable energy, energy efficiency, carbon pricing, land use change, transport emissions, adaptation to climate risks and low-carbon research and development.</p>
<p>These efforts <a href="http://news.nationalgeographic.com/news/energy/2014/02/1402277-global-warming-2-degree-target/">do not yet add up</a> to a credible global response that will limit the rise in global temperatures to less than two degrees Celsius – the objective of international climate negotiations. So we may expect not just more laws but also more rigorous laws over the coming years. But what relation does this have to financial markets?</p>
<p>Britain’s <a href="http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/news/green-finance-por-substantive/">Environmental Audit Committee</a> has recently warned that global efforts to combat climate change could in due course pose a risk to financial stability. Coal, oil and gas companies are a substantial part of the stock market, certainly in the UK, and their share price is determined, among other factors, by the size of their fossil fuel reserves.</p>
<p>The carbon contained in these reserves is <a href="http://www.lse.ac.uk/GranthamInstitute/publications/Policy/docs/PB-unburnable-carbon-2013-wasted-capital-stranded-assets.pdf">three times more</a> than we can burn if we are to avoid dangerous climate change. In other words, unless we find a cheap way to capture and store carbon, two-thirds of the fossil fuel reserves of coal, oil and gas majors will have to remain under ground. These companies, it would appear, are overvalued.</p>
<p>There is little evidence that the market shares this concern. Optimists and green investors point to a growing interest in environmental, social and corporate governance investment. Green bonds are booming, although they are issued mostly by blue chip companies and investors are sheltered from actual green risk. </p>
<p>But much of the energy industry has a very different view. Here, the talk is of a new age of fossil fuels, of abundant new reserves from unconventional sources – in particular shale gas, which has already transformed the energy market in the US.</p>
<p>So who is right: those who look forward to a resurgence of fossil fuels or those who warn about unburnable carbon? </p>
<p>It is hard to blame hard-nosed city analysts for being doubtful about tight carbon constraints, especially if their valuations focus on the short-term. Few countries have made a significant dent into their greenhouse gas emissions. Where emissions have come down, it has often been because of unconnected factors, such as the economic crisis in Europe or the advent of shale gas in the US.</p>
<p>City analysts will also point out that climate laws do not guarantee policy certainty. In the 2008 Climate Change Act the UK has one of the most sophisticated climate change laws, which gives UK climate change policy a clear long-term direction. But it has not prevented short-term policy alterations, as today’s budget statement may again show. Australian investors will make a similar observation about their policy environment.</p>
<p>It is also the case that not all climate change laws are as authoritative as the UK’s Climate Change Act or Mexico’s General Law on Climate Change. Particularly in developing countries climate policy is often made by executive order rather than passed by parliament.</p>
<p>But these provisions can be powerful too: China’s current five-year plan includes constraints on carbon emissions per GDP that are <a href="http://www.cccep.ac.uk/Publications/Policy/docs/Walking-alone-How-the-Uks-carbon-targets-compare-with-its-competitors.pdf">on a par with Britain’s carbon budgets</a>, if these were expressed in the same way. The UK’s third carbon budget translates into a reduction in carbon intensity of 39% by 2020, relative to 2005, compared with China’s ambition of a 40-45 per cent cut. </p>
<p>More tangibly, policy makers are increasingly willing to penalise emissions by <a href="http://www.cccep.ac.uk/Publications/Policy/docs/Walking-alone-How-the-Uks-carbon-targets-compare-with-its-competitors.pdf">putting a price on carbon</a>. The EU <a href="http://ec.europa.eu/clima/policies/ets/index_en.htm">Emissions Trading Scheme</a> may be ailing, but through a combination of taxes, trading schemes and regulation OECD countries impose carbon penalties. Prices range from less than £8 per tonne of CO<sub>2</sub> produced in Mexico, New Zealand and the United States to over £70 per tonne of CO<sub>2</sub> in Germany, Japan, Norway, South Korea and Switzerland. </p>
<p>The <a href="http://www.lse.ac.uk/GranthamInstitute/publications/Policy/docs/Climate-change-policies-and-the-UK-business-sector.pdf">impact of these measures on firm performance</a> has so far been modest, but they have given an edge to firms that are willing to cut their emissions.</p>
<p>A tentative finding from the analysis of the 500 climate laws so far is that one of the most powerful drivers of climate legislation is the number of climate laws passed elsewhere. There appears to be a strong element of peer pressure and intergovernmental knowledge exchange. If this is confirmed, it would point towards a self-reinforcing cycle. </p>
<p>The more climate change laws are passed – and the current pace is <a href="http://www.globeinternational.org/studies/legislation/climate">one new law per country every 18-20 months</a> – the more ready policymakers become to take further action. The financial sector would do well to take note.</p><img src="https://counter.theconversation.com/content/24231/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sam Fankhauser is Co-Director of the Grantham Research Institute on Climate Change at the London School of Economics. He is a Director at Vivid Economics and a member of the UK Committee on Climate Change. His research is funded the Grantham Foundation for the Protection of the Environment and the UK Economic and Social Research Council (ESRC).</span></em></p>The number of climate change laws on the statue books of the world’s leading economies grew from less than 40 in 1997 to almost 500 at the end of 2013. Most leading countries now have legal provisions…Sam Fankhauser, Co-Director, Grantham Research Institute, London School of Economics and Political ScienceLicensed as Creative Commons – attribution, no derivatives.