Reliance on fossil fuels could cause global economic crisis within decades

Smokestack smoke, air pollution
Public Domain Wikimedia

According to Fiona Harvey over at The Guardian, "plunging prices for renewable energy and rapidly increasing investment in low-carbon technologies" could leave fossil fuel companies with trillions of dollars in stranded assets, sparking a global financial crisis with ramifications well beyond Big Energy itself.

Her (excellent) reporting is based on a study by J. F-. Mercure et al. called Macroeconomic impact of stranded fossil fuel assets, which posits that low-carbon technology diffusion, energy efficiency and climate policy are beginning to have a significant impact on fossil fuel demand. (Think Norwegian oil consumption dropping thanks to electric cars, for example, or UK energy emissions dropping to Victorian-era levels.) The researchers suggest that stranded fossil fuel assets could result in a discounted global wealth loss of somewhere between US$1–4 trillion. and that—because clean energy technologies are now maturing to become directly competitive—much of this drop in demand will occur regardless of whether or not pro-climate policies are adopted by governments.

I have no argument with any of the above. Indeed we've warned of the carbon bubble many times before. My concern, however, is in how much of the reporting on this story is subtly framed—namely that efficiency, renewables or electrification of transport are potential 'causes' of such a crash. While true, to some degree, there's a danger that this is read by some as a negative consequence of low carbon technologies—as opposed to a negative consequence of our over reliance of fossil fuels in the first place. Indeed, it's not a million miles away from the logic that we should keep uncompetitive coal plants burning because of jobs, national security or an electoral college advantage for certain politicians.

You wouldn't blame withdrawal symptoms on an addict giving up drugs. You'd blame them on the addiction. And the same is true here. Indeed the researchers themselves are very clear: Whether or not this crash results in a 2008-like financial crisis will depend on how and if financial markets take proactive steps to lessen their exposure to fossil fuels. For climate stability alone, we need to wean ourselves off of fossil fuels as fast as possible—the threat of financial exposure just provides one more incentive to do so.

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