There are, we are told, only two options. Either we stop burning fossil fuels before our carbon dioxide emissions drive the planet's average temperature up a full 2C, in which case we will push the world into the biggest-ever recession. Or we continue to burn fossil fuels and push the planet into runaway warming, with lethal consequences for a large part of the human race.
The 2008 bank crash that triggered the recent recession was caused mainly by reckless investment that created a "bubble" in house prices. When the bubble burst, hundreds of billions of dollars' worth of investments suddenly became worthless. The losses were so great that they nearly brought the whole banking system down.
This time the problem is a "carbon bubble". The market valuation of the world's 200 biggest oil, gas and coal companies is about $4 trillion, a figure based on the assumed value of their confirmed reserves that are still in the ground. Or, more precisely, a figure based on the assumption that they will eventually be able to sell all of those reserves to customers who want to burn them.
On the strength of that assumption, the fossil fuel companies have been able to take on $1.5 trillion of debt, and last year alone they spent $647 billion in the search for even more oil, gas and coal reserves. But what if they will never be able to sell all of their reserves? What if the need to avoid runaway warming forces governments to curb the burning of fossil fuels, so that much of those reserves has to stay underground forever?
This is the focus of a new report titled "Unburnable Carbon 2013". The report's authors, the Grantham Research Institute at the London School of Economics and the Carbon Tracker Initiative, have the support of organisations like the HSBC and Citi banks, the Standard & Poor's rating agency and the International Energy Agency.
