Energy groups risk wasting $1.6 trillion of investment by assuming that current emissions-cutting policies will not be tightened up in the light of the latest science and international climate change goals, according to the think tank Carbon Tracker.
In a new report, Mind the gap: the $1.6 trillion energy transition risk, it warns that there is “a yawning gap” between the Paris Agreement, which pledges to keep climate change well below 2°C above pre-industrial times and aims for 1.5°C, and government policies, which are consistent with 2.7°C of warming.
The group says the study is the first to model demand for oil, gas and thermal coal under the International Energy Agency’s Beyond 2 Degrees Scenario introduced last year, aligned with 1.75°C, the mid-point of the Paris Agreement, and compare it with the IEA’s New Policies Scenario, aligned with 2.7°C, consistent with the emissions policies announced by global governments.
By comparing fossil fuel demand in a 2.7°C world with that of a 1.75°C world – the mid-point of the Paris Agreement – Carbon Tracker found that the oil sector would be hardest hit, with $1.3 trillion of future spending at risk. Projects that are inaccessible and/or technically difficult and therefore costly, are most at risk. “New oil sands investments will be uneconomic, and only a minority of potential new Arctic and extra heavy oil investment will go ahead,” the report said.
The US, with its extensive, relatively high-cost shale oil sector, is most exposed with $545 billion at risk, followed by Canada, the home of the world’s largest oil sands reserves ($110 billion), China ($107 billion), Russia ($85 billion) and Brazil, which has extensive reserves off its eastern coast that lie under 2km of salt that itself lies under 2km of ocean, hundreds of kilometres offshore ($70 billion).