The Bank of England is to conduct an enquiry into the risk of fossil fuel companies causing a major economic crash if future climate change rules render their coal, oil and gas assets worthless.
The concept of a “carbon bubble” has gained rapid recognition since 2013, and is being taken increasingly seriously by some major financial companies including Citi bank, HSBC and Moody’s, but the Bank’s enquiry is the most significant endorsement yet from a regulator.
The concern is that if the world’s government’s meet their agreed target of limiting global warming to 2C by cutting carbon emissions, then about two-thirds of proven coal, oil and gas reserves cannot be burned. With fossil fuel companies being among the largest in the world, sharp losses in their value could prompt a new economic crisis.
Mark Carney, the bank’s governor, revealed the enquiry in a letter to the House of Commons environment audit committee (EAC), which is conducting its own enquiry. He said there had been an initial discussion within the bank on “stranded” fossil fuel assets.
“In light of these discussions, we will be deepening and widening our enquiry into the topic,” he said, involving the financial policy committee which is tasked with identifying systemic economic risks. Carney had raised the issue at a World Bank seminar in October.
More on: www.theguardian.com/environment/2014/dec/01/bank-of-england-investigating-risk-of-carbon-bubble
