Skip to main content

Sign up for our newsletter.

Quality journalism. Progressive values. Direct to your inbox.

If you’ve been waiting for the right time to support our work—that time is now.

Our mission is simple: To inform. To inspire. To ignite change for the common good.

But without the support of our readers, this model does not work and we simply won’t survive. It’s that simple.
We must meet our Mid-Year Campaign goal but we need you now.

Please, support independent journalism today.

Join the small group of generous readers who donate, keeping Common Dreams free for millions of people each year. Without your help, we won’t survive.

The Bank of England is the second oldest central bank in the world. (Photo: Captain Robert Fenton/flickr/cc)

Bank of England Issues Warning Over Looming 'Carbon Bubble' Threat

'As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels...may take a huge hit,' predicts one of Europe's oldest banks

Deirdre Fulton

The Bank of England, one of the oldest banks in the world, has joined the growing ranks of those warning of the financial risk posed by a "carbon bubble," which will occur if urgently needed climate change regulations render coal, oil, and gas assets worthless.

"One live risk right now is of insurers investing in assets that could be left 'stranded' by policy changes which limit the use of fossil fuels," Bank of England official Paul Fisher told (pdf) the Economist's Insurance Summit 2015 in London on Tuesday. "As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels and related technologies—a growing financial market in recent decades—may take a huge hit."

Reserves are by definition bodies of oil, gas or coal that can be drilled or mined for financial gain. Currently, regulators allow companies to book them as assets, and on the assumption that they are at zero risk of being stranded—left below ground, "value" unrealized—over the full life of their exploitation.

But several recent analyses have shown that most existing reserves of fossil fuels cannot be burned if global warming is to be limited to 2° Celsius, as the world's nations have pledged. A study in January found that to avert climate disaster, the majority of fossil fuel deposits around the world—including 92 percent of U.S. coal, all Arctic oil and gas, and a majority of Canadian tar sands—must stay in the ground.

Despite such warnings, the Guardian notes, "companies spent $670bn (£436bn) in 2013 alone searching for more fossil fuels, investments that could be worthless if action on global warming slashes allowed emissions."

The newspaper further cites former U.S. Treasury Secretary Hank Paulson, who said in 2014: "When the credit bubble burst in 2008, the damage was devastating. We’re making the same mistake today with climate change. We're staring down a climate bubble that poses enormous risks to both our environment and economy."

These economic concerns have bolstered a vibrant and growing fossil fuel divestment movement around the world. As Common Dreams reported in December, "the elite investor class and world leaders have been much slower to admit the Earth has limits to the amount of carbon and other greenhouse gases it can absorb."

However, as University of Queensland economics professor John Quiggin wrote last year: "Leaving aside the ethics of divestment and pursuing a purely rational economic analysis, the cold hard numbers of putting money into fossil fuels don't look good."

Since 2012, the London-based Carbon Tracker Initiative has warned of how the governing financial system—in its gross over-valuation of fossil fuel reserves—leads to "capital being wasted on carbon intensive projects that are not certain to generate value, and are not consistent with the coming carbon constrained world."

When the Bank of England announced its new research agenda last week, acknowledging for the first time systemic environmental risks such as climate change, Carbon Tracker Initiative research director James Leaton said: "It is encouraging to see this major central bank seeing the need to move with the times and understand its role in dealing with one of the major challenges facing our economies today: climate change. We hope to see other financial regulators around the world responding in a similar fashion and collaborating on this issue."

According to the Carbon Tracker Initiative's calculations, up to 80 percent of oil, gas and coal reserves listed on stock exchanges are unburnable. 

"The six trillion dollar bet is that this calculation remains entirely theoretical, and that fossil-fuel companies will be allowed to keep pumping up the carbon bubble by investing more cash to turn resources into reserves, and continue booking them at full value, assuming zero risk of devaluation," environmentalist Bill McKibben and Carbon Tracker chairman Jeremy Leggett wrote in 2013. "It's a bet that effectively says to government: 'nah, we don’t believe a word you say. We think you’ll do nothing about climate change for decades'."


Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

"I'm sure this will be all over the corporate media, right?"
That’s what one longtime Common Dreams reader said yesterday after the newsroom reported on new research showing how corporate price gouging surged to a nearly 70-year high in 2021. While major broadcasters, newspapers, and other outlets continue to carry water for their corporate advertisers when they report on issues like inflation, economic inequality, and the climate emergency, our independence empowers us to provide you stories and perspectives that powerful interests don’t want you to have. But this independence is only possible because of support from readers like you. You make the difference. If our support dries up, so will we. Our crucial Mid-Year Campaign is now underway and we are in emergency mode to make sure we raise the necessary funds so that every day we can bring you the stories that corporate, for-profit outlets ignore and neglect. Please, if you can, support Common Dreams today.

 

'We WILL Fight Back': Outrage, Resolve as Protests Erupt Against SCOTUS Abortion Ruling

Demonstrators took to the streets Friday to defiantly denounce the Supreme Court's right-wing supermajority after it rescinded a constitutional right for the first time in U.S. history.

Brett Wilkins ·


80+ US Prosecutors Vow Not to Be Part of Criminalizing Abortion Care

"Criminalizing and prosecuting individuals who seek or provide abortion care makes a mockery of justice," says a joint statement signed by 84 elected attorneys. "Prosecutors should not be part of that."

Kenny Stancil ·


Progressives Rebuke Dem Leadership as Clyburn Dismisses Death of Roe as 'Anticlimactic'

"The gap between the Democratic leadership, and younger progressives on the question of 'How Bad Is It?' is just enormous."

Julia Conley ·


In 10 Key US Senate Races, Here's How Top Candidates Responded to Roe Ruling

While Republicans unanimously welcomed the Supreme Court's rollback of half a century of reproductive rights, one Democrat said "it's just wrong that my granddaughter will have fewer freedoms than my grandmother did."

Brett Wilkins ·


Sanders Says End Filibuster to Combat 'Outrageous' Supreme Court Assault on Abortion Rights

"If Republicans can end the filibuster to install right-wing judges to overturn Roe v. Wade, Democrats can and must end the filibuster, codify Roe v. Wade, and make abortion legal and safe," said the Vermont senator.

Jake Johnson ·

Common Dreams Logo