The Climate Crisis and the Crisis of Stranded Fossil Fuel Assets

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A Socialist Project e-bulletin ... No. 1995 ... February 10, 2020

The Climate Crisis and the Crisis of Stranded Fossil Fuel Assets

Marvin Gandall

The world’s oil, gas, and coal companies would incur what the Financial Times (FT) recently described as "breathtaking" losses if they’re not allowed to extract and burn their enormous reserves.

In total, fossil fuel CO2 emissions contained in untapped reserves are estimated at 2910 gigatonnes (GT) or nearly three trillion metric tons. To put that number in context, a sole GT is twice the mass of the global human population and enough to stretch 200 million elephants from the earth to the moon. The FT estimates that more than half these assets would be stranded if the 2°C global warming target set by the 2015 Paris Agreement were met.

Assets held by ExxonMobil, Saudi Aramco, Total SA, Royal Dutch Shell and other corporations include rights purchased to explore in a given area as well as reserves under wells and other infrastructure already producing hydrocarbons. In the unlikely event the rise in temperature was more drastically curtailed to 1.5°C, more than... 80 per cent of these assets would be rendered worthless. This would inflict losses of nearly a trillion dollars on shareholders, or about one-third of the current valuation of the world’s major oil and gas companies.

About 33 GT of carbon emissions were released in 2019, according to the International Energy Agency (IEA). If the annual rate of emissions were frozen at that level, a further 2640 GT would still be burnt by century’s end, well beyond the target of 1200 GT which the UN Intergovernmental Panel on Climate Change assumes is necessary to hold the rise in global warming to 2°C. To meet the more ambitious 1.5°C limit, only 464 GT of the estimated 2910 GT of CO2 in the remaining oil, gas and coal assets could be burnt. Producers with the highest carbon intensity in their oil and gas reserves, notably those in the Canadian tar sands, would be hit hardest.

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