A new buzz phrase in the push to limit greenhouse gas emissions is ?unburnable carbon? ? an effort to define and then wall off the portion of the world?s still-vast reserves of coal, oil or natural gas that might, if combusted, cause unacceptably costly or dangerous climate change. The effort builds, to a large extent, on studies aiming to create a ?carbon budget? for the world?s nations ? divvying up the amount of emissions (and thus fuels) below that threshold. The most notable paper, published in Nature, was??Greenhouse-Gas Emission Targets for Limiting Global Warming to 2??C.? (2??C being 2 degrees Celsius). (Earlier this year, Katherine Bagley wrote a nice piece on the influence of that paper.)
This notion underlies a lot of campaigns, ranging from Ecuador?s effort to raise enough money from international contributors to ?leave the oil in the soil? under its splendid Yasun? National Park to Bill McKibben?s ?Do the Math? campaign to rid university and college endowments of fossil fuel investments.
An article in the latest issue of The Economist explores whether acknowledgement that some fossil fuel stocks are unburnable means companies with big coal or oil reserves are overvalued, at least on long time horizons. Here?s the lede and a link to the rest:
Markets can misprice risk, as investors in subprime mortgages discovered in 2008. Several recent reports suggest that markets are now overlooking the risk of ?unburnable carbon?. The share prices of oil, gas and coal companies depend in part on their reserves. The more fossil fuels a firm has underground, the more valuable its shares. But what if some of those reserves can never be dug up and burned? [The rest.]
I initiated a related Twitter discussion:
The economist Richard Tol, long focused on climate policy, has already offered a tough challenge to the ?carbon bubble? notion:
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