Mike Scott, Contributor
ExxonMobil’s publication of a report into its climate risks felt like a ground-breaking moment in the debate about carbon-stranded assets.
Just a month later, another such moment has arrived, in the form of the latest report from Carbon Tracker, the campaign group that highlights the risks that climate change presents for investors. The report* says that energy companies have earmarked an estimated $1.1 trillion of capital expenditure for projects that can only make money if the oil price remains higher than $95 per barrel, while some are only viable at a price of $120-$150.
Yet the International Energy Agency says that to meet global climate targets, two thirds of current reserves must remain unburnt, so if a global climate deal is reached in 2015, demand for fossil fuels will come under severe pressure and prices will fall. Many oil companies see this as very unlikely – ExxonMobil, for example, in its report said that “it is difficult to envision governments choosing [a global low-carbon energy strategy] in light of the negative implications for economic growth and prosperity that such a course poses.” Many investors are also deeply skeptical that any meaningful deal will emerge, but it is far from the only risk to high prices. MORE