There is an economic number that is
giving me nightmares. I stumbled on the number in an article by Bill
McKibben in Rolling Stone in July. He got it from a London research
organization called Carbon Tracker Initiative. Let's see if I can
give you nightmares, too. The number is US$20 trillion. That's about
20 years' worth of U.S. Deficits. It is 30 times the Canadian
national debt. It is 150 times the value of all the gold taken out of
Northeastern Ontario in the last 100 years. It's the kind of money
that people kill for.
Economists believe that people respond
to economic incentives. Twenty trillion would provide a pretty
powerful economic incentive to lie, bribe, and even to let people
die. Twenty trillion would pay for a lot of propaganda, and in the
U.S.A. it would buy a lot of congressmen.
It is also the value of just 80 per
cent of the value of the proven coal and oil and gas reserves owned
by private and public companies and governments.
Why focus on 80 per cent of the value
of reserves? Because 80 per cent could disappear.
You probably know that most scientists
think we have to limit global warming to two degrees to have a
reasonable chance of avoiding catastrophic climate change.
Politicians at the Copenhagen climate conference in 2009 agreed with
the scientists. Add or subtract half a degree if you don’t trust
the science. It won’t affect the story.
The Potsdam Institute for Climate
Impact Research figured out that there is a four in five chance that
we can avoid crossing that dangerous line if we limit the world's
carbon dioxide release between now and 2050 to about 565 gigatons.
Again, you can add or subtract a few hundred gigatons – it won’t
affect the story. The main thing to notice is that 565 gigatons is a
small fraction of proven coal, oil and gas reserves.
If we can only burn 20 per cent of the
current reserve, 80 per cent becomes stranded assets. They can’t be
sold. The people who own those stranded assets lose $20 trillion.
The owners of all those reserves pay
huge salaries to their CEOs to maintain the value of their assets.
Their highly competitive CEOs eagerly donate money to anti-carbon-tax
politicians and to climate change deniers like our own Mr. Stephen
Harper. They fund TV ads promoting tar sands projects for the jobs
they create. They pay for two-page spreads showing the beautiful
artificial lakes they plan to create.
You can see why $20 trillion is giving
me nightmares; $20 trillion is a whopping big incentive to deny a lot
of very convincing science.
But the story gets worse. An
unjustifiable run-up of prices is called a bubble. Bubbles burst.
Bursting bubbles can bring on depressions. When the U.S. housing
bubble burst in 2007, it caused the biggest financial crisis since
the 1930s. In one day, total U.S. stock market losses exceeded $1
trillion. The world economy has not recovered. The value of sub-prime
mortgages in the 2007 crash was only about $1.2 trillion and only
part of that was really lost.
So here we are between a rock and a
hard place. On one side we have some of the smartest people in the
world telling us not to burn $20 trillion worth of carbon. On the
other side, we have a potential financial collapse because some of
the most powerful people in the world believe that we can burn all
that carbon. When and if they realize we can’t, financial markets
The financial impacts are the subject
of Carbon Tracker's recent research paper called Unburnable Carbon
–Are the world’s financial markets carrying a carbon bubble? The
paper calls for major reform of the world's financial markets.
Unfortunately, reform in the financial markets is like Paul Ryan’s
mountain climbing achievements – more aspiration than
But all this leads to one surprising
conclusion. The first carbon assets to be stranded will be high-cost,
high-carbon reserves like Alberta’s tar sands. It is probably a
good idea to sell them off to foreigners as fast as we can. The Nexen
sale may be a good way to protect a lot of American investors from a