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Are Fossil Fuel Companies Pouring Money Down the Drain?

Kevin Grandia's picture
Spake Media House Inc.

Kevin is the President of Spake Media House Inc. a consulting firm that brings online power to non-profits, campaigners and advocacy groups.

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  • Apr 28, 2013
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crude oilDespite an international agreement to reduce emissions from carbon-intensive sources, oil and coal companies continue to pour hundreds of billions of dollars a year into finding new fossil fuel deposits containing enough carbon to more than double global climate pollution emissions.  

This is the conclusion of a new report finding that $674 billion was spent globally last year alone on the discovery of new fossil fuel deposits that will likely never be used. 

The report, Unburnable Carbon 2013: Wasted Capital and Stranded Assets, authored by researchers at the Carbon Tracker Initiative, Grantham Foundation and the London School of Economics and Politics, describes the idea of a “carbon bubble” that is the result of global fossil fuel reserves that already far exceed the maximum amount we can afford to burn and still avoid the most disastrous effects of climate change.

Despite this growing carbon bubble, and the inevitable movement towards a greatly reduced reliance on carbon intensive fuels in the future, energy companies continue to pour billions of dollars into discovering new fossil fuel reserves. 

If this all plays out as researchers predict, energy companies will end up with a potential $6 trillion in stranded assets that will never be exploited – oil and coal reserves that the world will not need.

It’s kind of like buying five cars, when you only need one, so four of the cars just sit and rust in a field. But for oil companies these stranded assets aren’t a few old rusty Fords, but instead vast tracks of land of significantly diminished value in a world that no longer requires their product to operate.

According to the report:

“The analysis shows that between 60-80% of coal, oil and gas reserves of publicly listed companies could be classified ‘unburnable’ if the world is to achieve emissions reductions that mean an 80% probability of not exceeding global warming of 2°C.”

This conclusion is based on the most optimistic reduction targets resulting in only 2 degrees Celsius of warming, but even at 3 degrees of warming (a totally disastrous scenario), the report concludes that there would still be “significant restraints on our use of fossil fuel reserves between now and 2050. Yet companies in the oil, gas and coal sectors are seeking to develop further resources which could double the level of potential CO2 emissions on the world’s stock exchanges to 1,541 billion tonnes.”

These companies are investing billions and billions without taking into account even these most conservative reduction projections.

Professor Lord Nicholas Stern of Brentford, Chair of the Grantham Research Institute on Climate Change and the Environment, said:

“Smart investors can already see that most fossil fuel reserves are essentially unburnable because of the need to reduce emissions in line with the global agreement by governments to avoid global warming of more than 2°C. They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision. But I hope this report will mean that regulators also take note, because much of the embedded risk from these potentially toxic carbon assets is not openly recognized through current reporting requirements.”

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Louise Stonington's picture
Louise Stonington on May 4, 2013

 Of course there are ‘proponents of fossil fuels.’  Check out this 1998 memo of the Petroleum Industry outlining its plan to convince the public that climate science is uncertain. http://www.euronet.nl/users/e_wesker/ew@shell/API-prop.html   a practice which the Guardian reported recently is still continuing.  They have been very successful. Instead of believing the 98% of scientists who agree that we need to reduce use of energy, switch from fossil fuels to clean energy and conserve forests, most people are ignoring the problem.

The real question is not how warm the Earth is now, but how warm it will be when it finishes responding to the carbon dioxide CO2 that we have already added to the atmosphere, and continue to add to it. The current projection is  4 to 6oC warming by the end of this century. The ball of rock we call the Earth will still be here, and maybe half the species. No coastal cities, no coastal or delta agriculture, no agriculture further North because of lack of soil, no seafood because shellfish, coral nursery areas,  and foraminafera at the bottom of the fish chain will be killed by acidity, Tropical forests may expire, and of course there is that methane issue, vast amounts that are now frozen being released and spiraling the temperatures even higher.

Natural gas, when it burns, emits 117,000 tons of carbon dioxide (CO2) per billion BTU of energy output, oil emits 164,000 and coal 208,000. So burning coal puts out 91 tons more CO2 per BTU than natural gas.    Natural gas is mostly methane, warming 72 times as much as CO2 over a 20 year period,  and 25 times as much over a 100 year period. When it is drilled, transported and stored, it leaks and gets vented. The EPA used industry estimates of leakage, and is just beginning to require reporting on that. One recent field study in Colorado putting the rate at 4%, another calculating 8%, which would make the warming effect of natural gas more than that of coal or diesel.  Even if US regulations require developers to capture those leaks, there is no guarantee they can or will, and it is certain that the 96% of the world’s reserves of natural gas in other countries will not.

When natural gas is used in vehicles, extra energy used to compress it adds to its warming potential, making it even worse.

The ramping up of  natural gas is chilling the market and investment draw of green technology. We needenergy investment to go into clean energy, made in America, that we can export and out compete fossil fuels.

So, what to do now? Put new investment in clean technology, get government help with improving the national grid which needs replacement anyway, and pass a carbon tax to give incentives to that change in investment.

 

 

 

 

 

Schalk Cloete's picture
Schalk Cloete on May 5, 2013

The exhaust gasses from a natural gas plant is something like 4% CO2 while captured CO2 is close to 100%. There is no comparison. Check out this short article for some info about the very real asphyxiation risk related to CCS. 

I also doubt whether pumping CO2 underground and then again out through an exit well which will have to be especially created, kept secret by buying out all of those involved and cleared for miles around (to avoid asphyxiation) can be a profitable operation at all. 

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