Carbon bubble

From Wikipedia, the free encyclopedia

A carbon bubble is a type of hypothetical economic bubble that could affect the valuation of fossil fuels based assets. Currently the price of fossil fuels companies shares is calculated under the assumption that all fossil fuel reserves will be consumed. This may be overly optimistic.

History

Carbon bubble appears to be a recent term. A search of English books on Google Ngram revealed no instances of this term.[1]

The term "carbon bubble" was popularized by the Carbon Tracker Initiative. It published key reports in July 2011 and April 2013:

Perhaps the most widely read popular media article on this subject "Global Warming's Terrifying New Math" was written by Bill McKibben and published in Rolling Stone magazine in July 2012.

Probable causes

Overall the main cause for the Carbon Bubble can be summed up in the following: there won't be a peak in fossil fuels production rather there will be a peak in fossil fuel consumption.[2][3]This means that a considerable amount of fossil fuels will remain in the ground.

Divestment campaigning

The ongoing fossil fuels Divestment campaign in universities, churches[4] and pension funds[5] may contribute to increasing interest in divesting from fossil fuel companies.[6][7]

Cheaper clean energy

The price of renewable energy is continually dropping. Currently new wind power is cheaper than new coal and gas power in Australia[8] and USA[9] also the electricity produced from a photovoltaic roof system is cheaper than the electricity from the grid in many countries and places in the world.[10]

Government action on climate change

In order to prevent "dangerous" Climate Change world governments should limit the concentration of atmospheric CO2 to around 350 ppm; this basically means that huge amounts of fossil fuels must stay in the ground.[11]

Real pollution control

Fossil fuels are known for their huge negative externalities or hidden costs.[12] Tackling this market failure will make alternative energies more competitive and will reduce the consumption of fossil fuels.[13]

Cancellation of government energy subsidies

According to IMF governments around the world gave $523 billion direct subsidies for fossil fuels in 2011.[14] If a Carbon Tax of $25 per ton of CO2 is included the subsidies total $1.9 trillion only for 2011.[15] Removing fossil fuels subsidies will further reduce their consumption and make the alternative energies even more competitive.

Renewable corporations lobbying

As the penetration of the renewable energy increases so will the wealth of the renewable energy corporations. This and the increasing number of employees in the renewable energy sector will inevitably transform into political lobbying against fossil fuels.[16]

Electric transportation

Switching to electricity based transportation like electrical vehicles from fossil fuel based transportation will reduce the demand for fossil fuels particularly petroleum.[17] Combining roof photovoltaics with second hand EV batteries will further reduce the dependence on fossil fuels as they will provide the needed grid storage for the times when the intermittent renewable energy sources are not producing electricity.[18]

References

  1. ↑ http://books.google.com/ngrams/graph?content=carbon+bubble%2CCarbon+bubble%2CCarbon+Bubble&year_start=1800&year_end=2013&corpus=15&smoothing=3&share=
  2. ↑ Stanford researchers say 'peak oil' concerns should ease , Stanford Report, July 9, 2013
  3. ↑ Oil's Future Draws Blood and Gore in Investment Portfolios , Bloomberg, Nov 18, 2013
  4. ↑ Church Dropping Fossil Fuel Investments , The New York Times, 3 July 2013
  5. ↑ Oral Evidence Taken before the Environmental Audit Committee , House of Commons Environmental Audit Committee, 26 June 2013
  6. ↑ Preventing a carbon bubble crash, ABS, 13 May 2013
  7. ↑ The Economic Case for Divesting from Fossil Fuels , Renewable Energy World, 15 May 2013
  8. ↑ Australian Wind Energy Now Cheaper Than Coal, Gas, BNEF Says, Bloomberg, 7 Feb 2013
  9. ↑ New Study Finds that the Price of Wind Energy in the United States Is Near an All-Time Low, Lawrence Berkeley National Laboratory, 06 August 2013
  10. ↑ German PV drops to 15 cents max, Renewables International, 2 May 2013
  11. ↑ On ‘Unburnable Carbon’ and the Specter of a ‘Carbon Bubble’, The New York Times, 2 May 2013
  12. ↑ Coal's hidden costs top $345 billion in U.S.: study, Reuters, 16 Feb 2011
  13. ↑ As Pollution Worsens in China, Solutions Succumb to Infighting, The New York Times, 21 March 2013
  14. ↑ EWEA Blog: Global fossil fuel subsidies amount to $1.9 trillion – IMF, EWEA, 5 April 2013
  15. ↑ IMF Calls for Global Reform of Energy Subsidies: Sees Major Gains for Economic Growth and the Environment, IMF, 27 March 2013
  16. ↑ Beyond the PTC – Wind Energy's Future, Renewable Energy World, 9 May 2013
  17. ↑ “Peak Oil” Less A Concern As Alternatives Reduce Demand, Cleantechnica , July 23rd, 2013
  18. ↑ GM, ABB Demonstrate Chevrolet Volt Battery Reuse Unit, General Motors, November 11, 2012
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