The Power of the Carbon Bubble

The Carbon Bubble has arrived.  It has finally emerged as a subject for consideration and debate.   Hardly a day goes by that there isn't some discussion of the Carbon Bubble.

In case you're not familiar with it, the Carbon Bubble arises out of the calculation, based on pure physics, of how much CO2 our atmosphere can carry if we're to have much hope of staying within the 2C safety limit for global warming.

You see, once you know the maximum greenhouse-gas carrying capacity the atmosphere can be permitted to hold, you can subtract the amount of atmospheric CO2 that's already up there and come up with a remainder, just like they taught you in grade school.

Now, once you get that remainder, you can do all sorts of things with it.  For example, you can use it as a yardstick by which to measure our fossil fuel reserves or at least those already logged into the asset column by our fossil fuel industry.   You look at those reserves and figure out how much additional greenhouse gas will be generated by burning them.   And that's where it gets ugly.

There's a bit of disagreement on specifics but the overall consensus is that most of the known reserves of fossil fuels must be left untouched, safely in the ground, if our civilization is to have much hope of getting through this century.   Some estimates hold we can't use more than 20% of the reserves.     Others claim we can burn a third.

It's created an usual consensus of climate change activists and hard-nosed energy analysts.

America's fastest growing social movement [is] ''Go Fossil Free'', a nation-wide blitz calling for universities, governments and churches to freeze new investments in fossil fuel assets, and to sell what they've already got.

 

The impetus for the campaign is a set of simple numbers - a global carbon budget. It's a way of framing the climate crisis that is now uniting student activists and market analysts.

The former use the numbers to prosecute a moral case that the fossil fuel industry has gone rogue; the latter, for a cold-blooded calculation that trading away from carbon-heavy assets is in an investor's own interest.

The numbers were set out in a report called ''Unburnable Carbon'', which was released last year by the Carbon Tracker Initiative, a group of analysts and environmentalists in the UK. It highlighted the work of the Potsdam Climate Institute, which in 2009 produced a set of emissions scenarios together with their likely influence on global temperatures.

These are the numbers: for a low chance - one-in-five - of exceeding 2-degrees warming, we can only emit another 565 gigatonnes of carbon dioxide by mid-century. But proven fossil fuel reserves (held by listed corporations, private companies and nation states) equate to 2795 gigatonnes - five times the carbon budget. In Copenhagen in 2009, the world's governments agreed to limit warming to 2 degrees. To do so, four-fifths of our fuel must stay in the ground.

James Leaton, Carbon Tracker's research director, says this ''huge overshoot'' of reserves represents a ''carbon bubble'' in financial markets. We're on track to exceed the budget by 2028. ''Investors need to start questioning the wisdom of companies pouring more capital into developing even more reserves,'' he says.

In its World Energy Outlook for 2012, the International Energy Agency presented a similar case. Using the same research, but choosing a higher, 50-50 threshold for exceeding 2-degrees warming, it stated that two-thirds of proven reserves must stay in the ground, unless carbon capture and storage is widely deployed. (It observed that the pace of deployment of the technology ''remains highly uncertain''.)

So how can we make sense of this?   Well, it we can only burn somewhere between one-fifth and one-third of known reserves of fossil fuels, we're in a huge, unrecognized glut of carbon-based energy.  

Because there's a glut of fossil fuels they're vastly overpriced.  The actual price, the price we'll probably be heading for in the near future, will be far lower.

Because of the glut there's plenty of lower-carbon fossil fuels to go around.   Market analysts are arriving at "a cold-blooded calculation that trading away from carbon-heavy assets is in an investor's own interest." 

So, heavy-carbon assets are simply bad business.   Yet here at home we're still throwing government money and support into the development and export of the costliest, highest-carbon petroleum on the planet, Athabasca bitumen.   Anybody see anything going sideways here?   Can anybody hear that creaking of a door that's about to slam shut?

With all these alarms going off almost daily you might think the Masters of Canada's Universe would be reacting if only because we've got so much at stake.   They've bet the farm on bitumen.   And now it's beginning to look like they made a lousy bet.

Alberta's premier and Joan Cusak lookalike, Alison Redford, perhaps unwittingly referred to a "bitumen bubble" as the source of her province's current economic plight.   Her solution?   Let's double down and get pipelines built so that we can invest massively more money into Athabasca to produce two, three, maybe five times as much of the costliest, highest-carbon petroleum on the planet.   Steve Harper seems to agree with her entirely.   Maybe legislatures aren't the most fitting institutions for these people.