This a thread for discussion on dealing with the carbon bubble, and addressing the question of Fossil Fuel divestment.
First, a very brief discussion of what the carbon bubble is. My personal definition is that the carbon bubble is the enormous amount of money invested in future fossil fuel exploration and extraction, with the expectation that those reserves will be consumed. This of course assumes that the status quo remains in place, and that governments do nothing to curb fossil fuel use, that the market doesn't shift toward clean energy technologies, and that carbon capture and storage does not come to realization. The current fossil fuel reserves amount to about three times higher than the amount of carbon that can be warmed to keep the world below 2C of warming.
So that presents a few possible outcomes: 1. Status quo, fossil fuel investment stays in place, gov'ts do nothing, world burns exponentially more carbon. 2. The world acts on climate change and restricts fossil fuel use, the carbon bubble bursts dramatically, millions of investors lose their shirts, possible severe economic recession ensues. 3. There is a more gradual, steady divestment in fossil fuels, investors get out of unburnable carbon, the carbon bubble is deflated and becomes smaller in size, the carbon bubble bursts and has a less consequential impact than option 2.
I really don't know what will happen, but I have gone ahead and personally divested from fossil fuels. Not only because I see serious future risk in these stocks, but also because I agree that if it's wrong to ruin the climate, it's wrong to profit off it as well. I cannot try to make money on something that I don't personally agree with. If I learned a company I had stock in was doing something abhorrent, I would act accordingly and sell the stock. I try to invest in companies that not only can get a profit but also make the world a better place. I suppose that fits me in the category of activist investor. Anyway, I would really love to hear your thoughts on the carbon bubble and fossil fuel divestment. Please also vote in the poll, if you would.
Here are some links you may find helpful:
This is a very nice widget showing you the placement of fossil fuel investments:
Carbon Bubble Interactive | Carbon Tracker Initiative
Here is an article from the Economist that sums it up. Either governments won't do anything about climate change, or fossil fuel companies are overvalued.
Energy firms and climate change: Unburnable fuel | The Economist
A Motley Fool article bringing up that Energy investors should keep the carbon bubble on your mind:
http://www.fool.ca/2014/04/02/warning-1-risk-energy-investors-should-worry-about/?utm_source=rss&utm_medium=rss&utm_campaign=warning-1-risk-energy-investors-should-worry-about
From a Bloomberg article:
Bloomberg LP Launches First Tool That Measures Risk of Assets | InsideClimate News
From a Guardian article:
'Unburnable' carbon fuels investment concerns | Guardian Sustainable Business | Guardian Professional
First, a very brief discussion of what the carbon bubble is. My personal definition is that the carbon bubble is the enormous amount of money invested in future fossil fuel exploration and extraction, with the expectation that those reserves will be consumed. This of course assumes that the status quo remains in place, and that governments do nothing to curb fossil fuel use, that the market doesn't shift toward clean energy technologies, and that carbon capture and storage does not come to realization. The current fossil fuel reserves amount to about three times higher than the amount of carbon that can be warmed to keep the world below 2C of warming.
So that presents a few possible outcomes: 1. Status quo, fossil fuel investment stays in place, gov'ts do nothing, world burns exponentially more carbon. 2. The world acts on climate change and restricts fossil fuel use, the carbon bubble bursts dramatically, millions of investors lose their shirts, possible severe economic recession ensues. 3. There is a more gradual, steady divestment in fossil fuels, investors get out of unburnable carbon, the carbon bubble is deflated and becomes smaller in size, the carbon bubble bursts and has a less consequential impact than option 2.
I really don't know what will happen, but I have gone ahead and personally divested from fossil fuels. Not only because I see serious future risk in these stocks, but also because I agree that if it's wrong to ruin the climate, it's wrong to profit off it as well. I cannot try to make money on something that I don't personally agree with. If I learned a company I had stock in was doing something abhorrent, I would act accordingly and sell the stock. I try to invest in companies that not only can get a profit but also make the world a better place. I suppose that fits me in the category of activist investor. Anyway, I would really love to hear your thoughts on the carbon bubble and fossil fuel divestment. Please also vote in the poll, if you would.
Here are some links you may find helpful:
This is a very nice widget showing you the placement of fossil fuel investments:
Carbon Bubble Interactive | Carbon Tracker Initiative
Here is an article from the Economist that sums it up. Either governments won't do anything about climate change, or fossil fuel companies are overvalued.
Energy firms and climate change: Unburnable fuel | The Economist
A Motley Fool article bringing up that Energy investors should keep the carbon bubble on your mind:
http://www.fool.ca/2014/04/02/warning-1-risk-energy-investors-should-worry-about/?utm_source=rss&utm_medium=rss&utm_campaign=warning-1-risk-energy-investors-should-worry-about
From a Bloomberg article:
Bloomberg LP Launches First Tool That Measures Risk of Assets | InsideClimate News
"People are getting the idea that one of the main risks—perhaps the main risk—from climate change for investors and pension funds relates to hydrocarbon investment," said Craig Mackenzie, head of sustainability at the Scottish Widows Investment Partnership, which manages $234 billion in assets and is a part of Lloyds Banking Group. "The fact that 20 percent of [investment] portfolios are invested in oil, gas and mining companies, and that those companies could be a lot less valuable in the future, has sort of brought it all home."
From a Guardian article:
'Unburnable' carbon fuels investment concerns | Guardian Sustainable Business | Guardian Professional
For the last decade, the energy industry has been convinced that demand for oil, gas and coal will keep growing quickly for the next 20 years; oil prices will remain high, and China will continue to build two coal power stations a week. The profits for oil and mining companies will keep flooding in.
The investment community has largely accepted this view and backed companies' investment of hundreds of billions of dollars a year in finding and developing new reserves.
Of course, rampant growth in demand for coal and oil is depressing for those worried about climate change. If this demand growth continues, it seems unlikely that we can avoid dangerous climate change. But what if the energy industry's bullish forecasts are wrong? In the past 12 months a counter argument has been gaining momentum in the investment community.
The side of this story that has captured the imagination focuses on "carbon bubbles", as experts argue that there is already more carbon embedded in the reserves of the fossil fuel companies than the world can burn if we are going to keep below a 2-degree temperature rise. These reserves may be "unburnable" and company share prices may be overinflated. The latest warning came a few days ago from Al Gore.
But there is an even more urgent story to tell: demand for coal in the US has fallen by 20% or so over the past five years. New air pollution regulations are making coal increasingly expensive, so power companies are burning cheap shale gas instead. US carbon emissions are also down – to levels last seen in the mid-1990s.