Year 4, Month 5, Day 16: Go Talk To Ownership

From The Economist:

Either governments are not serious about climate change or fossil-fuel firms are overvalued

MARKETS can misprice risk, as investors in subprime mortgages discovered in 2008. Several recent reports suggest that markets are now overlooking the risk of “unburnable carbon”. The share prices of oil, gas and coal companies depend in part on their reserves. The more fossil fuels a firm has underground, the more valuable its shares. But what if some of those reserves can never be dug up and burned?

If governments were determined to implement their climate policies, a lot of that carbon would have to be left in the ground, says Carbon Tracker, a non-profit organisation, and the Grantham Research Institute on Climate Change, part of the London School of Economics. Their analysis starts by estimating the amount of carbon dioxide that could be put into the atmosphere if global temperatures are not to rise by more than 2°C, the most that climate scientists deem prudent. The maximum, says the report, is about 1,000 gigatons (GTCO2) between now and 2050. The report calls this the world’s “carbon budget”.

It took a while to find the hook for this letter. May 4:

“Either governments are not serious about climate change or fossil-fuel firms are overvalued” reads the subhead on your May 4th article, “Unburnable Fuel.” But the two propositions are hardly mutually exclusive. It is obvious that the governments of the world’s developed nations are averse to the political risk-taking demanded by meaningful action on climate — and the staggering long-term costs of oil and coal demonstrate that the real price of these energy sources has been profoundly miscalculated.

Once disaster mitigation, public health impacts, and runaway global warming (not to mention the various expensive wars fought over oil) are considered, it is apparent that unburned fossil fuel reserves are only “assets” if a stockpile of unexploded nuclear bombs is likewise valued.

No, it’s far from an either/or proposition. Rather, it is precisely because fossil-fuel corporations are grotesquely overvalued that industrialized governments aren’t serious about addressing the climate crisis.

Warren Senders

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