OPINION by Jeremy Leggett

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In my quarter of a century of warning about the climate change threat and advocating the renewable-energy solution, I have never seen anything worry the fossil-fuel incumbency the way the carbon bubble debate has this year.

As a consequence, I expect to see a major diversion of investment from fossil fuels to clean energy before long. Let me explain that uplifting prognosis using an account of recent history.

On 18 April, Carbon Tracker, a small group of financial analysts that I chair, published its second report. In our first report in 2011, we had calculated the amount of “unburnable carbon” in coal, oil and gas reserves if governments meet their commitments to keep the rise in global temperatures below the danger threshold of 2°C; the figure we reached for this “stranded” carbon was 80%. We also analysed its distribution, company by company and stock exchange by stock exchange.

In light of this, our second report looked at the capital expenditure that could be wasted over the next ten years by listed fossil-fuel companies in chasing reserves that will have to be left in the ground. The answer is more than $6trn, if last year’s spend is replicated.

If you are a diehard carbonhead, this argument is new and dangerous. It does not use ecological or moral levers to try to stop the enormous amounts of capital flowing dysfunctionally to cook the planet. It does not even require governments to regulate emissions in the way they have promised. It simply invites investors to recognise that they might, and that the capex would be better returned to them as dividends.

Immediately we scored a hit. HSBC oil and gas analyst Paul Spedding said at the launch: “This report makes it clear that ‘business as usual’ is not a viable option for the fossil-fuel industry in the long term. Management should already be looking to new business models that reduce the risk of stranded assets destroying shareholder value. In future, capital allocation should emphasise shareholder returns rather than investing for growth.”

Of course, the moral arguments, made in parallel, make an even stronger case. In the US, the Fossil Free campaign, launched by a coalition of student organisers and groups such as 350.org, has been arguing for divestment of fossil fuels on moral grounds. As a result, more than 400 US university campuses and dozens of cities, including Seattle and San Francisco, have campaigns to promote divestment from hydrocarbons.

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