The Wicked Trinity – Part II and III introduced two of the three elements of the trinity. They are the 2 oC global warming target set in the Paris Agreement and the “carbon majors”. Carbon majors presently own most of the proven fossil fuel reserves and are collectively responsible for the majority of the historical anthropogenic greenhouse gas emissions. This post will introduce the third element of the trinity. Which is the risk of carbon majors being stranded with their carbon asset. Please refer to the Wicked Trinity – Part I to have an introduction into how these three elements of the trinity are connected to each other.
The risk of carbon majors being stranded with their carbon assets is linked to the concept of “carbon budget”. Carbon budgets are expressed in Giga tonnes (Gt) of carbon or in Gt of carbon dioxide. Each carbon budget corresponds to a particular global warming threshold. They represent the maximum cumulative amount of carbon or carbon dioxide that can be emitted into the atmosphere to increase the chances of staying below a particular global warming threshold. The table 1 below is adapted from a a report published by the Intergovernmental Panel on Climate Change (IPCC) in 2014. It presents carbon budgets for different global warming threshold at the beginning of 2011. The numbers 66%, 50% and 33% represent fractions of the climate change model simulations that could stay below a given global warming threshold for a corresponding carbon budget.
Table 1: Carbon budget at the beginning of 2011 (adapted from the table 2.2 of the Climate Change 2014 Synthesis Report by IPCC)
According to a publication in the scientific journal Nature to meet the target of 2oC with a 50% likelihood, one third of the oil reserves, fifty percent of the gas reserves and most of the current coal reserves must stay underground. With the passage of Paris Agreement such a scenario can now be considered more realistic than ever. We can recall the premonition delivered by the Governor of the Bank of England Mark Carney in 2015, where he warned investors of the severe financial consequences of potential stranding of carbon assets due to future implication of climate change legislations. This risk is very high for the carbon majors who own most of the proven fossil reserves in the world. However the legitimacy of imposing this risk on carbon majors can be questioned. Should carbon majors bear the responsibility of anthropogenic climate change? There is no clear answer to this question. The way Heede attributed 63% of the global anthropogenic emissions to the carbon majors can be considered as an “extraction –based” accounting principle. According to this principle the total emissions are attributed to the country where fossil fuel is extracted in the first place. However, this is not just the only way of carbon accounting. There are also three other ways. The “production- based” principle attribute the emissions to the country where the emissions are actually produced. The “consumption –based” principles attribute the emissions to the country which consume products made from fossil fuel input. Finally the “income – based” approach attributes the emission to the country based on the proportion of the income generated across the value chain of the fossil fuel economy [1]. Each of these different accounting principles stems from competing ideas of justice and equity and there lies the root of the wickedness of the wicked trinity. My next and the concluding post of this series will try to capture this root cause of the wickedness lying at the heart of the wicked trinity.
To be continued…
Photo: Taken on April 11, 2011 and published in flickr by SS&SS:Creative Common Attribution – NonCommercial 2.0
[1] Please refer to Steininger et.al (2015) for a detailed discourse on these different carbon accounting principles and their practical and normative significance.
Climate Footnotes 