Carbon Tracker

Carbon Tracker is a London-based not-for-profit think tank researching the impact of climate change on financial markets.

Carbon Tracker
Motto"Financial specialists making carbon investment risk visible in the capital markets today"
TypeNon-profit financial think tank
HeadquartersLondon
Websitecarbontracker.org
Formerly called
Carbon Tracker Initiative

Carbon Tracker popularized the notion of a carbon bubble, which describes the incompatibility between the continued development of fossil fuel projects and combating climate change.[1][2]

History and work

Carbon Tracker was founded by UK fund manager Mark Campanale, with Jeremy Leggett serving as chairman.[3] The organisation's first two reports – Unburnable Carbon (2011) and Unburnable Carbon (2013) – argued that up to two-thirds of the world's known reserves and resources of oil, coal and gas could not be burned while avoiding dangerous levels of climate change. As summarized by Financial Times columnist Martin Wolf: "The conclusion is quite simple: burning known reserves of fossil fuels is incompatible with meeting the climate targets governments have set themselves."[4]

The Paris Agreement, adopted internationally in December 2015, aims to keep the global average temperature rise below 2 °C of warming, to avoid and reduce some of the most severe risks and impacts of climate change. But this requires carbon dioxide levels emitted in the atmosphere by 2050 to not exceed a "carbon budget" of up to 900 gigatonnes.[5] Drawing on research from the Potsdam Institute for Climate Impact Research, Carbon Tracker's reports showed that the world's reserves and resources of coal, oil and gas, if burned, would emit more than three times this amount: approximately 2800 gigatonnes. This raises the possibility that, by financing the development and production of fossil fuels that might never be consumed, investors are exposed to the risk of "stranded assets", rendered unprofitable by climate regulations and technological alternatives such as renewable energy.[6] Reuters described this idea – that investors were financing a "carbon bubble" – as having become 'part of "the climate change lexicon"; it has formed the basis for warnings about "stranded assets" by Bank of England Governor Mark Carney and inspired groups like Norway's sovereign wealth fund to divest billions in fossil fuel holdings'.[7]

Carbon Tracker's subsequent research investigated the implications of lower demand and low-carbon scenarios for the different fossil fuels of fossil fuels against lower demand, price and carbon emissions scenarios.[8][9][10][11]

Mark Carney echoed Carbon Tracker's warning on stranded assets in a 2015 speech to London insurers.[12] followed by the launch of a task force on climate-related financial disclosures under the auspices of the Financial Stability Board.[13]

Reports

Carbon Tracker's reports include:[14]

  • Unburnable carbon – Are the world's financial markets carrying a bubble? (2011)
  • Unburnable carbon 2013: Wasted capital and stranded assets (2013, joint research with the Grantham Research Institute on Climate Change and the Environment at the London School of Economics)[15]
  • Carbon Supply Cost Curves series:
    • Carbon Supply Cost Curves: Evaluating Financial Risk to Oil Capital Expenditures (2014),[16][17]
    • Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures (2014)[18]
    • Carbon Supply Cost Curves: Evaluating Financial Risk to Gas Capital Expenditures (2015)[19]
  • Lost in Transition: How the energy sector is missing potential demand destruction (2015)[20][21]
  • The $2 Trillion Stranded Asset Danger Zone: How fossil fuel firms risk destroying investor returns (2015)[22]
  • Sense and Sensitivity: Maximising Value with a 2D Portfolio (2016)[23][24]
  • Expect the Unexpected: The Disruptive Power of Low-carbon Technology (2017, joint research with the Grantham Institute - Climate Change and Environment at Imperial College)[25][26]
  • Apocoalypse now (2019)[27]
  • How to waste over half a trillion dollars (2020)[28]

In the media

In 2012, a Rolling Stone article by writer and campaigner Bill McKibben presented Carbon Tracker's research on the ‘carbon bubble’ to a wider audience[29][30] The article led McKibben to start a campaign calling for fossil fuel divestment which, as of December 2015, has seen organisations managing over $5.46 trillion committing to partial or total divestment.[31][32]

Carbon Tracker's analysis has been cited by investment banks HSBC,[33] Citi[34] and JP Morgan,[35] consultancies such as Accenture,[36] and the Dutch Central Bank.[37] It has also provoked a range of responses from major oil companies: ExxonMobil has stated it is 'confident that none of our hydrocarbon reserves are now or will become “stranded.”' [38] Chevron, while admitting that ' certain high-cost assets around the world could be impacted by a hypothetical GHG-constrained case', has similarly argued that the risk of stranded assets is 'manageable'.[39] Different positions have also been expressed by BP[40] and Statoil.[41]

According to the Carbon Tracker Initiative report in March 2020 wind and solar plants will soon be cheaper than running existing coal-fired power stations and coal power would struggle if markets were priced fairly.[42]

References
  1. Jackie Wills, "Carbon Tracker has changed the financial language of climate change", The Guardian, 15 May 2014 (page visited on 8 November 2016).
  2. Katharine Earley, "Carbon Tracker measures oil and coal risk for investors", The Guardian, 30 April 2015 (page visited on 8 November 2016).
  3. "September–October – The Unburnable Carbon Bubble". Archived from the original on 2 August 2017. Retrieved 30 November 2016.
  4. "Subscribe to read". Financial Times. Cite uses generic title (help)
  5. Malte Meinshausen, Nicolai Meinshausen, William Hare, Sarah Raper, Katja Frieler, Reto Knutti, David Frame and Myles Allen, "Greenhouse-gas emission targets for limiting global warming to 2°C", Nature, volume 458, pages 1158–1163, 2009.
  6. " At about that time, the carbon budget idea was plucked from academia by Carbon Tracker, a small London think-tank founded by Mark Campanale, one of the city’s first sustainable investment analysts. Applying the research to the world’s coal mines, oil wells and gasfields, the think-tank said that to have even a small chance of meeting the 2C target, only 565 gigatonnes of CO2 could be emitted up to 2050. But the known fossil fuel reserves of energy and mining companies were equal to 2,795 gigatonnes of CO2. So if the world ever took serious action to meet the 2C goal, most of those reserves would become “unburnable” stranded assets." Carney on climate: Stranded fossil fuel theory proves potent, Financial Times, 30 September 2015
  7. "From Bangladesh flood map to the Bank of England, a 'carbon bubble' is born". Reuters. 7 December 2016.
  8. "Oil Sands are Biggest Losers From Low Crude Prices: Study". Bloomberg L.P.
  9. Carbon Tracker Sees $283 Billion of LNG Projects as Uneconomic,Bloomberg, 2015
  10. "New coal mines uneconomic as China demand growth slows: Report", Economic Times, 22 September 2014
  11. "Energy Companies Risk $2.2 Trillion as Climate Goals Cut Demand". Bloomberg L.P. 25 November 2015.
  12. "Mark Carney warns investors face 'huge' climate change losses". Financial Times. "wholesale reassessment of prospects, especially if it were to occur suddenly, could potentially destabilise markets," he (Mark Carney) said, echoing warnings from the Carbon Tracker think-tank in London that pioneered the stranded carbon assets idea several years ago
  13. Energy Companies Risk $2.2 Trillion as Climate Goals Cut Demand, Bloomberg, 25 November 2015
  14. Brochure, Carbon Tracker Initiative (page visited on 8 November 2016).
  15. Investor Group Presses Oil Companies on 'Unburnable Carbon', Bloomberg, 2013
  16. "Climate rules could put $1.1 trl in oil investment at risk -report", Reuters, 7 May 2014
  17. "Oil groups warned over spending on high-cost areas", Financial Times, 8 May 2014
  18. "The Carbon Tracker Initiative (CTI) has also launched a new report: Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures, which provides investors and coal companies with a tool – the carbon supply cost curve – to help identify the projects where the most financial risk lies", Dina Medland, 'Green And Growth Can Go Hand In Hand Together', 2014, Forbes
  19. "Billions in gas projects stranded by climate change action, says thinktank", The Guardian, 7 July 2015
  20. "Lost in Transition: How the energy sector is missing potential demand destruction". carbontracker.org.
  21. "Are energy companies leading shareholders astray on future fossil fuel demand?", International Business Times, 21 October 2015
  22. Oil and gas companies 'risk losing $2tn', BBC News, 25 November 2015
  23. "A study just out by the Carbon Tracker initiative has a tantalizing conclusion for the oil and gas industry. If they align their investment plans with the 2° C target on global temperatures, the upstream assets of the world's seven largest listed oil and gas companies could collectively be worth $100 billion more, it says.", Oil And Gas: Change And Prosper? A New Growth Scenario In A 2-Degree World, Forbes, 5 May 2016
  24. "Two reports issued this week suggest that investors should strive to keep the spending straitjacket on oil companies even if prices improve further. One, by Carbon Tracker [...] seeks to show that pursuing new reserves at all costs would not only be bad for the environment, it would be bad business. It argues that even if climate-change policies severely constrain demand for oil, companies will still need to produce more of the black stuff. But if oil prices are anywhere below $120 a barrel, they would produce higher returns if they carry out selective drilling of low-cost wells rather than “business as usual”.", Not-so-Big Oil, The Economist, 7 May 2016
  25. "Expect the Unexpected: The Disruptive Power of Low-carbon Technology". carbontracker.org.
  26. "Cheaper renewables to halt coal and oil demand growth from 2020: research", Reuters, February 2, 2017
  27. Gray, Matt; D'souza, Durand; Sundaresan, Sriya (24 October 2019). Apocoalypse now. London, United Kingdom: Carbon Tracker. Registration required to download.
  28. Gray, Matt; Sundaresan, Sriya (March 2020). How to waste over half a trillion dollars: the economic implications of deflationary renewable energy for coal power investments. London, United Kingdom: Carbon Tracker. Landing page. Registration required to download.
  29. Bill McKibben "Global Warming's Terrifying New Math: Three simple numbers that add up to global catastrophe – and that make clear who the real enemy is", Rolling Stone, 19 July 2012 (page visited on 8 November 2016).
  30. Matthew C. Nisbet (March 2013). "Nature's Prophet: Bill McKibben as Journalist, Public Intellectual and Activist" (PDF) Discussion Paper Series #D-78. Joan Shorenstein Center on the Press, Politics and Public Policy, School of Communication and the Center for Social Media American University. p. 17.
  31. "I did base that article, and the subsequent divestment campaign, on CTI's numbers," he [Bill McKibben, n.b.] tells RTCC in an email." www.climatechangenews.com/2015/08/18/terrifying-math-how-carbon-tracker-changed-the-climate-debate/
  32. "Commitments".
  33. http://www.businessgreen.com/digital_assets/8779/hsbc_Stranded_assets_what_next.pdf
  34. "Energy Darwinism II. Why a Low Carbon Future Doesn't Have to Cost the Earth – Climate Policy Observer". Archived from the original on 10 November 2016. Retrieved 3 October 2016.
  35. JP Morgan North American Equity Research, Clean Tech Monitor, 1 October 2013
  36. https://www.accenture.com/_acnmedia/PDF-11/Accenture-Strategy-Energy-Perspectives-Rougher-Seas-Ahead.pdf#zoom=50
  37. http://www.dnb.nl/en/binaries/TimeforTransition_tcm47-338545.pdf?2016100316%5B%5D
  38. " http://cdn.exxonmobil.com/~/media/global/files/energy-and-environment/report---energy-and-carbon---managing-the-risks.pdf Archived 5 January 2019 at the Wayback Machine
  39. "The possible risk from 'stranded assets' is minimal and certainly manageable" (PDF). Archived from the original (PDF) on 12 June 2017. Retrieved 10 May 2017.
  40. http://www.bp.com/content/dam/bp/pdf/investors/bp-agm-notice-of-meeting-2015.pdf
  41. "Newsroom - Newsroom - statoil.com" (PDF).
  42. Wind and solar plants will soon be cheaper than coal in all big markets around world 12 March 2020
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