The latest UN assessment report states that CO2 emissions from the burning of fossil fuels may not exceed 1,100 gigatonnes if global climate warming of 1.5 to a maximum 2°C is not to be surpassed. On present levels of petroleum, natural gas and coal consumption, cumulative emissions will already surpass this threshold in 25 to 30 years' time.
A study recently published in Nature* examines this issue. If the amount of CO2 emitted into the atmosphere in future is not to surpass an overall amount of 1,100 gigatonnes, one-third of the world's exploitable oil reserves, half of all natural gas reserves and over 80% of coal reserves must remain untouched in the ground.
What this means is that the classical question regarding the finiteness of fossil energy resources is really the wrong question. The real problem is that in future, much of the existing fossil fuel resources should no longer be exploited. For if we burn all the fossil energy reserves already under exploitation, the result would be CO2 emissions that would exceed the maximum tolerable amount of CO₂ by three times. If we add the fossil resources merely presumed to exist on earth, total CO2 emissions would reach an estimated 11,000 gigatonnes.
Disinvestment from oil has begun
Should the international community decide that global fossil reserves are to remain in the ground, they would suddenly lose in value. Already, question are being raised regarding the profitability of the fossil fuels industry given the increased production costs of accessing and exploiting petroleum, natural gas and coal reserves, as well as the steadily declining cost of renewable energies. Despite the myriad of reasons being given for the fall in oil prices in recent months, it perfectly illustrates the impact of the price of oil on investments and the world economy. "Carbon tracker" estimates that should the price of oil remain below US$ 60 per barrel, some US$ 10 million already invested in extraction would go to waste. The energy and finance industry has reacted by suspending already approved extraction projects worth an estimated US$ 75 billion. At the end of 2014, German energy giant E.On announced its decision to spin off its fossil fuel business. The Rockefeller Foundation too has announced its intention to invest only in carbon-free projects in the future. And Warren Buffett, whose decisions are regarded as a guiding light in the financial world, recently sold off several million shares in ExxonMobil and other oil companies.
Despite the alarming climate research findings, most countries are still pressing ahead with quick and comprehensive exploitation of their national reserves, in some cases with government funding. Yet the foreseeable decline in the value of fossil resources should raise fundamental questions about government extraction programmes. The continued (mis)use of public monies for energy sources of the past is therefore politically irresponsible. Yet there is the danger that countries with fossil fuel reserves will cling to this policy and even try to speed up further exploitation – as if in a final sprint for the last available "atmospheric place". And developing countries argue that they are dependent on their fossil fuel resources to achieve the priority goal of poverty reduction. This argument does not hold up, however, considering that the technical means for climate-neutral energy supplies do exist today and could be funded.
The question therefore remains regarding the circumstances under which "catching-up economies" would forego relatively easily accessible fossil fuel reserves and the associated (albeit shrinking) value creation. It is unrealistic to expect the climate negotiations to arrive at an international "distribution of exploitation rights" let alone implement such a thing. The most promising way is therefore the rapid mobilization of sufficient technological and financial resources amongst rich countries, over and above traditional development aid.
Rethinking climate funding
The Nature study underscores the significance of international climate funding. The rich countries have already emitted over 2,000 gigatonnes of CO2 in the course of their industrialization and are therefore chiefly responsible for climate change. This is why they promised to provide developing countries with financial aid worth US$ 100 billion as of 2020. Yet they remain stubbornly closed to any concrete commitments and a plan as to how these additional funds are to be raised. Emerging countries too are calling for access to this kind of aid. But precisely because the consumption of fossil-based energy and the concomitant greenhouse gas emissions are rising rapidly in those countries, the concept of climate funding should be thought out anew. Besides, the first claims for compensation for renouncing the use of fossil fuels in the future are already on the table. In reference to Article 8(h) of the UN Framework Convention on Climate Change, which refers to national characteristics of States “…whose economies are highly dependent on income generated from the production, processing and export … of fossil fuels", Gulf States for example point to the shrinking world market resulting from mitigation measures. There is also the case of Ecuador, which insisted (in vain) on compensation for renouncing oil production in a nature reserve.
It is foreseeable that given the steadily contracting "atmospheric budget ", there could be more identical or similar demands in future. The world fossil fuels market is in transformation, though the fuller ramifications of that process are still unknown. The objective must nonetheless continue to be to channel climate funding toward supporting the poorest and most vulnerable countries. In addition, a central place should be given to the question of how to compensate countries that – in harmony with the North – have one-sidedly based their development on the burning of non-renewable resources.
* McGlade, Christophe and Paul Ekins (2014): „The geographical distribution of fossil fuels unused when limiting global warming to 2°C“. Nature (14016).