Stranded assets ...

A series of grass fires broke out around London amid an intense heatwave in July 2022. 

Photographer: Leon Neal/Getty Images

It's all about the money yet again because while the world burns, the so called stranded assets of fossil fuels continues to be worth over a trillion dollars thanks. in part, to bribes given to pols in order to enable investors to keep making money without regard to the impact said assets are having on planet earth.

In response, nations have promised to reduce their greenhouse gas emissions, primarily carbon dioxide from fossil fuels. Following the 2015 Paris Agreement, the US promised to reduce emissions by 50% from 2005 levels by 2030, and to achieve net zero emissions by 2050. Many other nations have made similar or more ambitious promises.  

As a consequence, financial markets should have begun marking down the value of “stranded” fossil fuel assets — reserves of oil and coal that simply can’t be burned if we’re to have a liveable future. Nearly a decade ago, then Governor of the Bank of England Mark Carney highlighted this problem with great public fanfare.

Yet the markets haven’t been listening. A recent study published in Nature Climate Change found that the present value of ostensibly stranded oil and gas assets still exceeds $1 trillion. They’re held mainly by private investors in OECD countries, and the value of assets held by prominent financial institutions is roughly twice that of the risk exposure which led to the banking collapse and financial crisis of 2007-2008.

It gets better ...

What’s going on? It might be, of course, that markets just aren’t very efficient, and investors are so far ignoring the horrific shock they’ll experience some time in the future. Or, it could be that investors just don't believe governments will act on their climate pledges, and really, who can blame them? Despite countless fine words, global greenhouse gas emissions are still relentlessly rising.

But there’s also a third possibility, illustrated by the recent dramatic collapse of climate legislation in the US Senate, where Democratic senator Joe Manchin, himself heavily invested in coal operations, tipped the balance against stronger climate policy, and was of course joined by the 50 Republican senators. It could be that fossil fuel companies and their investors — especially some powerful groups with extensive lobbying reach — hope to influence the future by keeping their fossil fuel valuations inflated. Perhaps they believe that continued confidence in fossil fuel assets might be enough to sway markets, encourage further investment, and ultimately convince the public to expect continued fossil fuel use. That is of course easier if effective climate mitigation policy is obstructed.

High Noon