Stranded Fossil Fuel Assets and the Carbon Bubble

In following the topic of economic bubbles, it’s worthwhile looking into what’s called the “Carbon Bubble.” The idea behind the Carbon Bubble has to do with stranded assets — assets that are on the books of a company but that can never be exploited for profit. This is potentially the case with companies that are in the business of extracting and exploiting fossil fuels — coal, oil, and gas. The problem is that such fuels are causing climate change and are thus becoming increasingly subject to regulation. It’s possible that a significant volume of fossil fuels now on the books of coal and oil companies will never come to the surface and will eventually have to be written off at massive loss.

This problem was well explained recently by Joel Makower at — see “Exxon, stranded assets and the new math.” Makower’s piece was prompted by an announcement that ExxonMobil, the U.S.’s largest energy company, will be releasing the first Carbon Asset Risk report by any such company. A press release from Arjuna Capital says that the forthcoming report “will provide investors with greater transparency into how ExxonMobil plans for a future where market forces and climate regulation makes at least some portion of its carbon reserves unburnable.”

ARB — 25 March 2014


How Can Local Economies Transition to a Petroleum-Scarce World?

Today I read an interview in New Scientist with Rob Hopkins, a key figure in the Transition Towns movement — see “Rob Hopkins: Getting over oil, one town at a time.” He writes about how communities can transition to a more sustainable economy at Transition Culture.

Hopkins describes the Transition Towns concept as follows:

A Transition Town is formed when a group of individuals gets together to ask how their community can mitigate the effects of a potential reduction in oil and drastically reduce their carbon emissions to offset climate change. The scheme has become so successful we now have 250 official Transition Towns and Cities worldwide, with many more interested in becoming involved.

One of the strategies being used to help communities transition to a petroleum-scarce economy is EDAP (Energy Descent Action Plan). Here’s a Slideshare presentation that explains how this process is working for some communities:

AB — 7 February 2010

Great infographic shows whether the world is getting better or worse

The following infographic linked from New Scientist aggregates various data sources to show multiple world trends. The upshot is that, overall, conditions for people are getting better (though obviously not for everybody — you know how statistics work). However, the environment is shown to be getting worse (click on the image to get to a full-size version you can actually read):

Is the world getting better or worse?

Is the world getting better or worse?

AB — 10 Sept. 2009

Energy Economist Says Oil Will Peak Sooner Than Expected

In an interview with The Independent, Dr. Fatih Birol of the International Energy Agency (IEA) says that most of the world’s major oil fields are already past their peak production — see today’s article, “Warning: Oil supplies are running out fast,” by Steve O’Connor.

When O’Connor asked Birol to explain the concept of “peak oil,” Birol replied:

This is the point when the maximum rate at which oil is extracted reaches a peak because of technical and geological constraints, with global production going into decline from then on.

The UK Government, along with many other governments, has believed that peak oil will not occur until well into the 21st Century, at least not until after 2030. The International Energy Agency believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier “oil crunch” because demand after 2010 is likely to exceed dwindling supplies.

For more information on peak oil, see my previous blog post “Peak Oil Notes.”

AB — 3 August 2009

5-Euro cardboard solar cooker could drastically reduce wood fires

On April 9, 2009, Forum for the Future announced that it has awarded a $75,000 prize to Kyoto Energy for its Kyoto Box, a cardboard solar cooker designed for households in developing lands. The foil-lined cooker can be made for only 5 Euros and can boil water as a substitute for woodburning.

Wood fires are considered a major source of deforestation and pollution in developing lands, as well as a source of greenhouse gases. They also present a household fire hazard and a danger to families’ health due to smoke inhalation.

The Kyoto Box (photo below, courtesy of Einar Lyngar, shows Kyoto Energy founder Jon Bohmer with the box) received the $75,000 prize in Forum for the Future’s FT Climate Change Challenge, which aims to “raise the profile of green innovation and demonstrate that there are solutions and money can be made from them,” according to the organization. The prize is sponsored by HP and FT (Financial Times).

Jon Bohmer and Kyoto BoxFrom the Bubbleconomics perspective, innovations like this represent, on the one hand, examples of entrepreneurial opportunities offered in the context of the Big Bubble problem — the proposition that the world economy is in an unsustainably overinflated state.

On the other hand, such innovations represent personal solutions for individuals and families that are struggling to survive on the lower tiers of the world economy. The Kyoto Box, as an example, provides a low-cost way to obtain clean water for drinking, cooking, and cleaning. In a previous post, we also pointed to the EDAR, a low-cost shelter for the homeless — see “Does Bubbleconomics offer solutions, or is it all negative?

For more details about the Kyoto Box, see this illustration at Kyoto Energy’s web site. Kyoto Energy offers some other interesting products, such as the Kyoto Turbo, a smokeless biomass cooker; the Kyoto Bag, a water carrier that can double as a solar-powered shower; and Kyoto Flash, a solar-charged light with battery backup. The company is also doing considerable work with larger-scale solar energy. The company is based in Nairobi, Kenya.

AB — 10 April 2009

Would they really hack the planet to sustain economic growth?

President Obama’s science advisor John Holdren tells the Associated Press that he has brought up geoengineering as a possible alternative in the fight against climate change in discussions with Cabinet-level U.S. officials, as well as with heads of agencies such as NASA and the Environmental Protection Agency (see AP’s article “Obama looking at cooling air to fight warming“).

Although Holdren is not advocating geoengineering right now — he believes reducing greenhouse gases is the right solution to global warming — he is concerned that “temperatures should be kept from rising more than 3.6 degrees,” writes AP science writer Seth Borenstein.

This will require that “the U.S. and other industrial nations … begin permanent dramatic cuts in carbon dioxide pollution by 2015, with developing countries following suit within a decade.”

Holdren’s concern is that such efforts are “racing against three tipping points,” according to Borenstein:

Earth could be as close as six years away from the loss of Arctic summer sea ice, he said, and that has the potential of altering the climate in unforeseen ways. Other elements that could dramatically speed up climate change include the release of frozen methane from thawing permafrost in Siberia, and more and bigger wildfires worldwide.

Wikipedia’s entry on “Geoengineering” defines the concept broadly as “the idea of applying planetary engineering to Earth,” involving “the deliberate modification of Earth’s environment on a large scale to suit human needs and promote habitability.”

One example example of geoengineering, Holdren told AP, would be:

Shooting sulfur particles (like those produced by power plants and volcanoes, for example) into the upper atmosphere … “basically mimicking the effect of volcanoes in screening out the incoming sunlight.”

This approach might be used to “try to produce a cooling effect to offset the heating effect of carbon dioxide and other greenhouse gases,” Holdren says.

Go here to see an interesting illustration from the New York Times of some possible solution geoengineering solutions (if you think “solutions” is the right word).

One statement in the Wikipedia article particularly caught my attention — it cited one “body of opinion that supports geoengineering because it may avoid or delay the difficult and expensive transition to a low carbon economy.”

From the Bubbleconomics perspective, I would suggest that governmental and economic interests might choose the geoengineering route as an effort to keep the Big Bubble inflated. In other words, environmental damage might be treated, whether consciously or unconsciously, as the price that has to be paid to maintain the overall economic bubble.

AB — 9 April 2009