Carbon reserves held by top fossil fuel companies soar
The carbon locked up in coal, oil and gas reserves owned by the world's biggest fossil fuel companies has swollen by 10% in the last five years, despite warnings from the World Bank and others that most existing reserves cannot safely be burned.
The top 200 publicly traded coal, oil and gas companies now hold 555 gigatonnes of CO2 in their fuel reserves, boosted by their continuing efforts to find and develop new reserves. That figure alone is close to the total amount the world could ever emit while keeping global warming below the danger limit of 2C.
Far more fossil fuels - about 2650GT - are held by state-owned companies, meaning that in total there are four to five times more fossil fuels in existing reserves than can be safely burned. But the exploitation of expensive fossil fuels in the Arctic, tar sands and deep sea waters, which scientists say must be kept in the ground, is dominated by the 200 commercial firms.
The 200 companies, which still spend billions a year searching for new reserves, are the focus of a fast-growing divestment campaign, backed by the UN, which is persuading investors to sell off their fossil fuel shares. TheGuardian is running a campaign asking the world's two biggest health charities, the Bill and Melinda Gates Foundation and the Wellcome Trust, to divest from fossil fuels.
The rise in carbon reserves is revealed in a list of the top 100 traded coal companies and top 100 oil and gas companies produced by Fossil Free Indexes (FFI), a US company. Coal India tops the coal list with Gazprom heading the oil and gas list. Western fossil fuel giants including ExxonMobil, Shell, BP, BHP Billiton and Anglo American all appear in the top 10.
"While the world's carbon budget goes down every year, as more and more CO2 is spewed into the atmosphere, the potential emissions [of the 200] are going up," said Stuart Braman, founder and CEO of FFI, who spent 20 years in the financial services industry with Standard and Poor's. Both MSCI and FTSE, major providers of financial indexes, have also created fossil-free or low-carbon indexes in response to demand from investors.
The FFI data shows that the top 10 coal companies alone own over half the carbon in the list, while the top 10 oil and gas companies own two-thirds of the carbon in those fuels. Braman said the carbon reserves were becoming more concentrated at the top as fossil fuel companies struggling with slumps in coal and oil markets merged.
The World Bank and Bank of England have both warned that international action on climate change could leave many fossil fuels assets worthless, potentially losing investors trillions of dollars. James Leaton, at the Carbon Tracker Initiative, which produced the first list of 200, said concerned investors could focus on an increasingly small number of companies.
"The lists show that fossil fuel energy investment decisions are actually concentrated in a small number of companies," said Leaton. "Determining where this capital is spent needs to be an important issue for investors, otherwise there is going to be a lot of capital wasted in coming years on developing fossil fuel reserves that cannot be burned."
Braman said FFI's analysis showed that investors divesting from fossil fuels in recent years would not have lost money. "The idea has been that you had to sacrifice return but that is not true," he said. "The bottom line is that when you look at the daily returns of the S&P 500 from January 2004 to 2014, with and without the fossil fuel companies, they are statistically indistinct."
The same applied to analysis of the periods before, during and after the 2008 financial crisis. A separate analysis by MSCI showed investors who dumped their fossil fuel holdings over the past five years actually earned 1.2% a year more than those remaining in coal, oil and gas.
Braman said FFI's top 200 list was a good guide for those wanting to divest, as it contains over 97% of the carbon owned by traded companies, which is about 17% of carbon in all fossil fuel reserves. "National fossil fuel companies own the easy stuff," he said, like Saudi Arabian oil. "It's the companies in FFI's Carbon Underground 200 who are going after the extreme stuff, which really needs to stay in the ground."
Braman founded the company after seeing divestment campaigner Bill McKibben present a talk in 2012. The talk left Braman wanting move his own investments out of fossil fuels: "I looked around for a fossil-free version of the S&P 500, but I couldn't find one."
He backs divestment as one tool to fight climate change. He said: "Many, many things are needed to get to a low-carbon world, but one of those things is keeping fossil fuels in the ground. Divestment is not an argument against a carbon tax or anything else as well."
This article first appeared in the Guardian
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