Bursting The Carbon Bubble

One way or another, the fossil fuel industry seems to be destined to shrink away.  A combination of technological advances and climate policies are going to drastically reduce the global demand for fossil fuels over the course of time.   New research shows that the demise of the fossil fuel industry will have profound consequences.

The decline in demand for fossil fuels is the result of alternative technologies for power generation, the adoption of electric vehicle technology, and increasing energy efficiency in businesses and households.  On top of these things, climate policies seeking to reduce carbon emissions will further decrease demand for fossil fuels.

Among countries, the transition will result in both winners and losers.  Clear winners will be countries that are major importers of fossil fuels such as China and the European Union.  Losers will be exporters such as Middle Eastern countries, Russia, the United States, and Canada.  If these countries keep up their fossil fuel investments and production levels despite declining demand, they could experience massive economic losses.

The U.S. is the only country that has withdrawn from the Paris Climate Agreement and the Trump administration seems determined to continue to invest in fossil fuel assets rather than diversifying and divesting from them.  According to a new study published in Nature Climate Change, the results could be disastrous.  Continuing investment in fossil fuels will create a dangerous “carbon bubble” that could burst with massive economic and geopolitical consequences.  If countries keep investing in equipment to search for, extract, process and transport fossil fuels, even though their demand decreases, they will end up losing money on these investments on top of their losses from limited exports.

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‘Carbon bubble’ coming that could wipe trillions from the global economy

Photo, posted March 19, 2014, courtesy of Steven Straiton via Flickr.

‘Bursting the Carbon Bubble’ from Earth Wise is a production of WAMC Northeast Public Radio.