By next year, a quarter of the world’s carbon emissions will be priced in some way. Businesses that now emit carbon pollution for free (or cheap) will soon see their costs rise.
In other words, carbon pollution is a business risk. It’s a bubble that’s going to pop, probably soon. The Carbon Tracker Initiative has popularized a term for this looming liability: “unburnable carbon.”
Even with grossly inadequate accounting models that underestimate costs to society (see David Stern’s May 2015 book, Why Are We Waiting?) if one quantifies the implicit climate subsidy received by leading fossil fuel companies as Chris Hope and colleagues at the University of Cambridge Judge Business School did. Hope multiplied the carbon emissions embedded in the companies’ products by the “social cost of carbon,” i.e., the net economic, health, and environmental cost of a ton of carbon dioxide, from 2008 to 2012 and took the results as a rough proxy for the level of carbon risk facing each company.
“For all companies and all years, the economic cost to society of their CO2 emissions was greater than their after‐tax profit, with the single exception of Exxon Mobil in 2008″. In other words, if these fossil fuel companies had to pay the full cost of the carbon emissions produced by their products, none of them would be profitable.
It’s even worse for pure coal companies, for which “the economic cost to society exceeds total revenue in all years, with this cost varying between nearly $2 and nearly $9 per $1 of revenue.” Total revenue, Hope and colleagues note, represents “employment, taxes, supply purchases, and indirect employment” — everything that coal companies contribute to the economy. It turns out the costs they impose through carbon emissions are larger than all those contributions combined. (For oil and gas companies, carbon costs generally range from 10 to 50 percent of total revenue.)
As Roberts notes: this is ” a good reminder that we are, in carbon terms, eating the seed corn, using up resources that only appear cheap because we’re shifting the costs to poor and future people, who don’t have the political power to stop us. It is grossly irresponsible.” The results would be even more dramatic if Hope et al. used a price per carbon which is over twice as high, as estimated by a recent study which tried to include the effects of climate change on economic growth as well as consumption estimated a value of $220 per tonne of CO2 in 2015.
To see David Roberts whole article, see http://www.vox.com/2015/7/24/9035803/fossil-fuel-companies-cost-of-carbon