Skip to content

☁️ "Carbon Budgets, Carbon Bubbles & the Risk to the Financial Sector"

Climate 21

Photo by Zbynek Burival / Unsplash

Table of Contents

Host: Tom Raftery
Guest: Mark Campanale | Founder & Executive Chairman | Carbon Tracker Initiative
Category: ☁️ Carbon Reduction

Podcast’s Essential Bites:

[1:40] “[The Carbon Tracker Initiative is] a nonprofit, financial think tank that's set up about 10 years ago […]. What we do is we model coal, oil and gas production. It's very focused, but we look at it through a financial market lens. Our audience is the financial community and financial regulators. […] And what we try to do as a think tank is look at how the clean energy transition, how climate policy is going to completely disrupt the whole of the energy system and the transportation system, and then try and give some steer to pension funds concerned about risk.”

[3:12] “If you were to get in a car and drive at motorway speed going vertically, upwards, it would take you less than 10 minutes before you’d escape the atmosphere. That’s the very thin layer of gases that’s surrounding the planet. And what we're doing with pollutions, we're putting tens of gigatons of carbon dioxide into the atmosphere, that very thin layer. And of course, what it's doing is the greenhouse effect. […] And so we can actually model scientifically how much carbon dioxide and other gases like methane we're putting in the atmosphere, and how that's likely to change temperature systems and weather systems. So that's the core concept of the carbon budget.”

[4:00] “We've had average warming, global average mean temperature of around 16 degrees Celsius, pretty stable over […] the last 10,000 years. The last 50 years, we've changed the carbon dioxide concentration from around 350 parts per million […] and increased above 400. And we're heading north of that. […] So the question then, that we have to ask ourselves is […] how much more are we planning to put into the atmosphere? You can look at historical trends in pollution. We emit around 40 gigatons of carbon dioxide a year. The budget we estimate […] to give us a 66% chance of avoiding this 1.5 degrees increase above the 16 degrees [is only] around 300 gigatons […]. The point of this is, if you're releasing 40 gigatons a year, then […] you're down to less than 10 years […] [before] locking in 1.5 degrees.”

[6:50] “What we didn't know 10 years ago is what percentage of [what] Exons and Shells and BPs […] produced and sold each year […] was causing the climate problem. […] Now, when we analyze those companies, we also analyzed the Saudi Aramcos and the state owned entities, so you need to look at the entire picture. And we were still able to conclude just the listed companies alone, we're going to break the carbon budget to 1.5 degrees […]. And what we said in our first report called “Unburnable, Carbon: Are the financial markets carrying a carbon bubble?” from 2011 is that this represented not just a risk to pension funds, and the public actually, they represented a risk to the financial stability of the whole market system and the banking system.

[7:47] “We estimate that something like a half of non bank corporate bonds are linked to the fossil fuel economy. So you're not just coal, oil and gas, you've got to add in aviation, cements, steel, shipping. You've got entire systems built around the fossil fuel economy. […] A third of shipping is to shipping oil and gas. […] If you decarbonize all of that, and you have to do it very rapidly, this represented quite a big systemic risk to the market. […] A quarter of equity capital markets and link to the fossil fuel system as well. So if you unravel not just the oil and gas sector, but you unravel the fossil fuel economy, decarbonize cement and steel and aviation, you're going to have to turn over the capital stock of the global economy. You're gonna have to replace high carbon manufacturing systems with low carb. And we have to have a financial market system that is able to absorb the costs, but then be strong enough actually to put the money up to replace capital stock with new systems.”

[11:28] “You're seeing people building pipelines, particularly, the Nord Stream pipeline from Russia to Europe, and the pipelines from Canada down into America that the investors are buying [into], thinking it's gonna have a 30-40 year life and infrastructure funds that are owned by pension funds are buying what they think is long life infrastructure, […] but they're wrong. I mean, a lot of this will have less than 10 year life, 5 year life in the case of the coal fired power stations. And it sort of begs the question, why do we have a financial system that is building completely new fossil fuel infrastructure? The figure that the International Energy Agency uses is that there's around $1 trillion a year globally spent on building out even more fossil fuels. Which has to be anyone's definition of insanity.”

[26:37] “The problem of climate change and global warming is primarily one of burning fossil fuels. So the Paris Agreement, it's an emissions reduction agreement that gets governments to write […] NDCs, nationally determined contributions, which are the governments’ plans to reduce emissions. The one thing most people will be surprised by, […] the words coal, oil and gas and fossil fuels don't appear anywhere in the Paris Climate Agreement. […] It's not a fossil fuel climate change treaty, it is an emissions reduction treaty, as if the two are not related. And so as a consequence, when we go into Glasgow, will there be any discussion by governments or even the scientists about constraining the production of fossil fuels? And the answer to that is no, there won't be.”

Rating: ⚡⚡⚡⚡

🎙️ Full Episode: Apple | Spotify
🕰️ 48 min | 🗓️ 11/03/2021
✅ Time saved: 46 min