̽��ֱ�� of Cambridge - carbon energy

‘Carbon bubble’ coming that could wipe trillions from the global economy – study

fpjl2 — Mon, 04 Jun 2018 12:06:33 +0000

Fossil fuel stocks have long been a safe financial bet. With price rises projected until 2040* and governments prevaricating or rowing back on the Paris Agreement, investor confidence is set to remain high.

However, new research suggests that the momentum behind technological change in the global power and transportation sectors will lead to a dramatic decline in demand for fossil fuels in the near future.

̽��ֱ��study indicates that this will now happen regardless of apparent market certainty or the adoption of climate policies – or lack thereof – by major nations.

Detailed simulations produced by an international team of economists and policy experts show this fall in demand has the potential to leave vast reserves of fossil fuels as “stranded assets”: abruptly shifting from high to low value sometime before 2035.

Such a sharp slump in fossil fuel price could cause a huge “carbon bubble” built on long-term investments to burst. According to the study, the equivalent of between one and four trillion US dollars could be wiped off the global economy in fossil fuel assets alone. A loss of US$0.25 trillion triggered the crash of 2008 by comparison.

Publishing their findings today in the journal Nature Climate Change, researchers from Cambridge ̽��ֱ�� (UK), Radboud ̽��ֱ�� (NL), the Open ̽��ֱ�� (UK), Macau ̽��ֱ��, and Cambridge Econometrics, argue that there will be clear economic winners and losers as a consequence.

Japan, China and many EU nations currently rely on high-cost fossil fuel imports to meet energy needs. They could see national expenditure fall and – with the right investment in low-carbon technologies – a boost to Gross Domestic Product as well as increased employment in sustainable industries.

However, major carbon exporters with relatively high production costs, such as Canada, the United States and Russia, would see domestic fossil fuel industries collapse. Researchers warn that losses will only be exacerbated if incumbent governments continue to neglect renewable energy in favour of carbon-intensive economies.

̽��ֱ��study repeatedly ran simulations to gauge the outcomes of numerous combinations of global economic and environmental change. It is the first time that the evolution of low-carbon technologies has been mapped from historical data and incorporated into "integrated assessment modelling".

“Until now, observers mostly paid attention to the likely effectiveness of climate policies, but not to the ongoing and effectively irreversible technological transition,” said Dr Jean-François Mercure, study lead author from Cambridge ̽��ֱ��’s Centre for Environment, Energy and Natural Resource Governance (C-EENRG) and Radboud ̽��ֱ��.

Prof Jorge Viñuales, study co-author from Cambridge ̽��ֱ�� and founder of C-EENRG, said: “Our analysis suggests that, contrary to investor expectations, the stranding of fossil fuels assets may happen even without new climate policies. This suggests a carbon bubble is forming and it is likely to burst.”

“Individual nations cannot avoid the situation by ignoring the Paris Agreement or burying their heads in coal and tar sands,” he said. “For too long, global climate policy has been seen as a prisoner’s dilemma game, where some nations can do nothing and get a ‘free ride’ on the efforts of others. Our results show this is no longer the case.”

However, one of the most alarming economic possibilities suggested by the study comes with a sudden push for climate policies – a ‘two-degree target’ scenario – combined with declines in fossil fuel demand but continued levels of production. This could see an initial US$4 trillion of fossil fuel assets vanish off the balance sheets.

“If we are to defuse this time-bomb in the global economy, we need to move promptly but cautiously,” said Hector Pollitt, study co-author from Cambridge Econometrics and C-EENRG. “ ̽��ֱ��carbon bubble must be deflated before it becomes too big, but progress must also be carefully managed."

One of the factors that may contribute to the tumult created by fossil fuel asset stranding is what’s known as a “sell-out” by OPEC (Organisation of the Petroleum Exporting Countries) nations in the Middle East.

“If OPEC nations maintain production levels as prices drop, they will crowd out the market,” said Pollitt. “OPEC nations will be the only ones able to produce fossil fuels at the low costs required, and exporters such as the US and Canada will be unable to compete.”

Viñuales observes that China is poised to gain most from fossil fuel stranding. “China is already a world leader in renewable energy technologies, and needs to deploy them domestically to tackle dangerous levels of pollution. Additionally, stranding would take a higher toll on some of its main geopolitical competitors. China has a strong incentive to push for climate policies.”

̽��ֱ��study authors suggest that economic damage from adherence to fossil fuels may lead to political upheaval of the kind we are perhaps already seeing. “Mass unemployment from carbon-based industries could feed public disenchantment and populist politics,” Viñuales said.

̽��ֱ��authors argue that initial actions should include the diversifying of energy supplies as well as investment portfolios. “Divestment from fossil fuels is both a prudential and necessary thing to do,” said Mercure. “Investment and pension funds need to evaluate how much of their money is in fossil fuel assets and reassess the risk they are taking.”

“A useful step would be to expand financial disclosure requirements, making companies and financial managers reveal assets at risk from fossil fuel decline, so that it becomes reflected in asset prices,” Mercure added.

*International Energy Agency. World Energy Outlook (OECD/IEA, 2016).

Macroeconomic simulations show rates of technological change in energy efficiency and renewable power are likely to cause a sudden drop in demand for fossil fuels, potentially sparking a global financial crisis. Experts call for a “carefully managed” shift to low-carbon investments and policies to deflate this “carbon bubble”.

Individual nations cannot avoid the situation by ignoring the Paris Agreement or burying their heads in coal and tar sands

Jorge Viñuales

Rich

Energy

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Taking the long view on climate change

bjb42 — Sat, 01 Sep 2007 15:53:42 +0000

̽��ֱ��Earth’s climate has always changed and no doubt always will. However, this alone does not tell us very much about the climate system: we need to be able to say exactly how and why climate can change. Today this requirement has been brought to the fore by the prospect of human-induced global climate change resulting largely from greenhouse gas emissions that arise from our massive and growing appetite for fossil fuels. Thousands of scientists are now striving to predict how a sharp rise in greenhouse gas concentrations will affect the entire climate system, including the ecosystems and societies that it supports. But how can we be sure about our theories of climate change, let alone our theories of ecosystem or market response? Just how important are greenhouse gases in controlling global climate? And what are the timescales and thresholds of climate adjustment? These are just some of the urgent questions that have been raised by the prospect of anthropogenic climate change.

To help answer such questions we can look to the past, at how the Earth’s climate evolved prior to the relative stability that human society has so far enjoyed. Researchers in the Department of Earth Sciences are taking up this challenge, using marine sediments as their lens into the past, and as a guide to the future.

Palaeoclimatology

̽��ֱ��study of past climate change – palaeoclimatology – aims to reconstruct what has happened in the past, in the oceans, on the land, in the atmosphere and in ecosystems, and to infer how the global climate system works ‘as a whole’. In the last 20 years of palaeoclimate research, three major questions have emerged that are particularly relevant to modern climate change. First, how did changes in solar radiation (insolation) and atmospheric carbon dioxide (CO2) conspire to trigger massive global climate upheavals such as the glacial–interglacial (‘ice-age’) climate cycles? Second, what regulates atmospheric CO2 concentrations under changing climatic conditions, and what roles can we ascribe to marine biological productivity or ocean circulation changes in particular? And third, how abruptly can regional climate change and with what repercussions for the rest of the world?

All of these questions are interconnected of course, although each bears on a different aspect of the climate system’s ability to pace and amplify climate perturbations through sensitive ‘feedback’ processes.

Past climate by proxy

A central aspect of palaeoclimate reconstructions is the ‘proxy’ character of our observations. Because scientists cannot measure past ocean temperatures directly, they must measure the impacts of past temperature changes instead, usually based on temperature-sensitive organisms or temperature-sensitive chemical constituents in their shells or skeletons.

As a palaeoceanographer, Dr Luke Skinner specifically makes use of marine sediments as a window into the past. Among the many advantages of using marine sediments are that they can be obtained from nearly two thirds of the Earth’s surface, they generally provide unbroken and often very high-resolution records of past conditions, and they contain a diversity of constituents that can be analysed, from tiny fossil shells to grains of sand dropped by passing icebergs.

To reconstruct past climate change, Dr Skinner collects and studies the fossil calcite shells of foraminifera – single-celled blobs of protoplasm – that have accumulated on the sea floor. Using the shells of these tiny creatures, Dr Skinner has been able to generate detailed records of temperature change, both at the sea surface and in the ocean interior. In combination with ice-rafted debris and oxygen- and carbon-isotope records, these reconstructions have helped to demonstrate that the North Atlantic region experienced very intense and abrupt climate swings in the past, involving massive glacier surges as well as drastic changes in the deep ocean circulation system and the Gulf Stream. It has also been possible to show that these same changes in the Atlantic Ocean’s circulation were accompanied by a ‘see-saw’ in temperatures across the hemispheres, with heat pooling in the South to the extent that it was not efficiently delivered to the North. Based on records such as these it is now clear that global change can be heterogeneous and can occur too suddenly to be presaged by obvious warnings.

Perspectives on the future

Although it is clear that no previous climate period can really serve as a blueprint for the future, important lessons can still be learned from the study of the past. One important example is the use of palaeoclimate data to guide the improvement of our climate simulation models. Because numerical and statistical models provide our only means for predicting future climate, it is imperative that they be as general as possible. Studies like those described here are helping to achieve this, by revealing the feedbacks, thresholds and characteristic timescales for climate adjustment, across a wide range of climatic contexts.

In the future, global CO2 levels will only be stabilised if we either drastically cut our emissions or identify, trigger or create a process that ‘mops up’ exactly as much CO2 as millions of consumers are able to produce each day (the basis of carbon capture). ̽��ֱ��history of climate change tells us that we are going to need as many one-way fluxes out of the atmosphere as we can muster if are going to compete with the ‘leak’ we have created in the Earth’s largest standing carbon reservoir, the solid Earth. We have much to learn about the climate system, both for our own sake and for the sake of knowledge itself.

For more information, please contact the author Dr Luke Skinner (luke00@esc.cam.ac.uk) at the Department of Earth Sciences.

Cambridge Earth Scientists are contributing to our understanding of the climate system by studying the history of climate change recorded in sediments deposited on the sea floor.

Studies like those described here are helping to achieve this, by revealing the feedbacks, thresholds and characteristic timescales for climate adjustment, across a wide range of climatic contexts.

Irargerich from Flickr

Melting is your destiny

Carbon capture

Whenever fossil fuel (coal, oil or gas) is burnt, carbon is released as CO2 into the atmosphere, where it traps the Sun's heat. Can we counteract this build-up by capturing and storing CO2? Any solution would require storage of many millions of tonnes reliably and possibly for up to 10,000 years. Compressing and injecting CO2 into deep geological formations could provide the answer. ̽��ֱ��presence of oil, gas and natural CO2 trapped in reservoirs underground for millions of years demonstrates that storage of CO2 is feasible. At the Sleipner Oil Field in the Norwegian sector of the North Sea, CO2 is already being separated from natural gas and re-injected at about 1 km depth below the sea surface. ̽��ֱ��CO2 rises through the sandy earth before spreading out below a series of thin mudstones beneath the thick overlying mudstone. A collaborative research project between Professor Mike Bickle in the Department of Earth Sciences and Professor Herbert Huppert in the Institute of Theoretical Geophysics has been modelling the spread of these accumulations to work out how much CO2 is trapped and to understand the flow of CO2 in the reservoir. A particular challenge is to predict the behaviour of the stored CO2 over time to determine the safety of long-term CO2 storage in this way. ̽��ֱ��benefits are clear, as Professor Bickle explains: 'CO2 storage is a feasible, politically achievable and relatively inexpensive way for dealing with the problem of increasing atmospheric CO2 levels. For more information, please contact Professor Mike Bickle (mb72@esc.cam.ac.uk) at the Department of Earth Sciences.

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