Carbon bubble burst forecast
New Delhi: A so-called “carbon bubble” linked to the world’s current dependence on fossil fuels could burst within 15 years, trigger a 2008-like financial crisis and wipe out trillions in global wealth, an international team of researchers warned on Monday.
But countries such as India and China may be “winners” in the crisis, the researchers said.
Their study has suggested that even current trends of countries adopting renewable energy technology in the energy and transportation sectors could lead to a dramatic decline in demand for fossil fuels between 2020 and 2040.
Their simulations suggest that this fall in demand could leave vast reserves of fossil fuels as “stranded assets”, abruptly turning from high-value assets to low-value assets before 2035.
“The bubble is still growing right now – investors believe fossil fuel consumption will go on for decades, they believe climate policies will not be tough enough,” Jorge Vinuales, a professor at the University of Cambridge and co-author of the study, told The Telegraph over phone.
“But our analysis shows that whether or not countries adopt stronger climate policies, the world is already on a course away from fossil fuels.”
The researchers simulated extrapolations of current trends in adoption of renewable energy technologies and the impact on the global economy in the coming decades.
Their study, published in the journal Nature Climate Change, has also predicted differential impacts on different sets of countries with high-volume importers and consumers such as India and China emerging “winners”and high-cost producers such as Canada, Russia and the US facing massive wealth losses.
As the bubble bursts, India, China and the European Union which currently rely on high-cost fossil fuel imports to meet their domestic needs could see plummeting oil import bills, the researchers say.
This, in combination with their own parallel efforts towards renewable energy technologies, would bolster gross domestic product and employment in these countries.
However, major exporters such as Canada, the US or Russia are likely to witness a collapse of their domestic fossil fuel industries. The scientists warn that losses will be exacerbated if these countries neglect renewable energy in favour of fossil fuels.
The wealth losses would be amplified if countries accelerate their pace towards adopting non-fossil renewable energy technologies to achieve the 2015 Paris climate pact’s target of preventing average global temperatures from rising above 2° C.
Their analysis has suggested that the global wealth loss could range from $1 trillion to $4 trillion, a loss comparable to the 2008 financial crisis.
The researchers have called for actions to “deflate” the carbon bubble. “Divestment from fossil fuels is both a prudential and necessary thing to do,” said Jean-Francois Mercure, a physicist-turned-climate researcher at the Radboud University in the Netherlands who led the study.
The researchers have cautioned that one factor that might exacerbate the crisis is a decision by Oil Producing and Exporting Countries (OPEC) to maintain their level of production despite a declining demand.
Source: telegraphindia
