Carbon Bubble Driven by Cheap Renewables Could Trigger Global Economic Crisis
Plummeting renewable energy costs and rapidly-rising investment in low-carbon technologies could turns trillions of dollars of fossil projects into stranded assets and trigger a global economic crisis, according to a new study this week in the journal Nature Climate Change.
“Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world. Instead, the authors’ detailed simulations found the demand drop would take place even if major nations undertake no new climate policies, or reverse some previous commitments,” reports National Observer, in a story picked up from The Guardian as part of the Climate Desk news collaboration.
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“That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.”
The idea of a “carbon bubble” has been in circulation for the better part of a decade, but the new research “shows that a sharp slump in the value of fossil fuels would cause this bubble to burst, and posits that such a slump is likely before 2035 based on current patterns of energy use,” the Observer notes.
“This is happening already—we have observed the data and made projections from there,” said lead author Dr. Jean-François Mercure of Radboud and Cambridge universities. “With more policies from governments, this would happen faster. But without strong [climate] policies, it is already happening. To some degree, at least, you can’t stop it. But if people stop putting funds now in fossil fuels, they may at least limit their losses.”
“Contrary to investor expectations, the stranding of fossil fuel assets may happen even without new climate policies,” agreed co-author Prof Jorge Viñuales. “Individual nations cannot avoid the situation by ignoring the Paris Agreement or burying their heads in coal and tar sands.”
But Mercure warned the shift off fossil fuels is moving too slowly to avert the worst effects of climate change, echoing widespread acknowledgement that faster, more ambitious government action will be needed to meet the goals of the Paris Agreement. “That could also help investors by pointing the way to deflation of the carbon bubble before they make new investments in fossil fuel assets,” the Observer states.