Earlier this year, an influential group of British politicians warned the Bank of England about the carbon bubble, but now it seems the idea is also catching on at the head of the bank too. According to The Guardian, Mark Carney, told a World Bank seminar that “the vast majority of reserves (of oil, coal and gas) are unburnable,” before urging investors to consider the long-term implications of the investments they make.
This is a big deal.
The carbon bubble—a term that refers to the idea that financial assets invested in coal and oil may become stranded as the world makes the necessary transition away from fossil fuels—has been gaining considerable traction of late. Norwegians are worried about their massive sovereign wealth fund’s reliance on oil investments, and pension funds may be deeply vulnerable to over investment in fossil fuels.
With the Rockefellers divesting their charity from fossil fuels, coal execs fretting about the future of their industry and Lego dumping its branding partnership with Shell Oil, Big Energy is getting squeezed from several sides right now.
If investors, who tend to listen when Mark Carney speaks, start to take the idea of a carbon bubble seriously, fossil fuel producers—and the myriad of industries that supply them—may find access to capital becoming a constraint on their future prospects.
Fossil fuels are nowhere near dead yet. But they also don’t look like the 100% safe bet they once were.