The Carbon Bubble And Divestment

I wrote a little about the carbon bubble in a previous post. But here’s a recap:

The “carbon bubble” (also known as “stranded carbon assets”) is based on the idea that the price of fossil fuel stocks are artificially inflated because fossil fuel corporations are planning to extract all of their carbon reserves. However, those reserves amount to five times more than what the planet can handle if the world is stay under 2 degrees Celsius of warming. When the world comes to this realization and begins the transition to renewable energy, the values of these fossil fuel stocks will decrease, and all of that carbon will be “stranded” underground. Since 20-30% of the average portfolio is comprised of fossil fuel stocks, this devaluation could cause a major hit to returns.

This is one of the most compelling economic arguments for fossil fuel divestment.

That is why The Guardian yesterday ran a story entitled “Carbon bubble will plunge the world into another financial crisis” on their front page. You should definitely read this story. It verifies the validity of the fossil fuel divestment campaign. For example, this sentence specifically cites the top 200 companies that we are targeting with divestment campaigns:

“HSBC warned that 40-60% of the market capitalisation of oil and gas companies was at risk from the carbon bubble, with the top 200 fossil fuel companies alone having a current value of $4tn, along with $1.5tn debt.”

It also shows that this is a serious discussion. The movement is about broad inclusion and making these issues mainstream.


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