The IEA weighs in on stranded assets - not just a green conspiracy?
- 04 Jun 2014, 15:00
- Simon Evans
CC2.0 Bryan Burke
Demand for fossil fuels would fall dramatically if the
world gets serious on climate change, according to
projections from the International Energy Agency.
That would leave major oil firms unable to recoup
money invested in new supplies, the IEA says. Their fossil fuel
assets could lose all value and become 'stranded'.
Smaller slice of the (energy) pie
Fossil fuels' share of the global energy mix will fall
from the current 82 per cent to 76 per cent in a 4 degree world,
the IEA says. That is a world the IEA calls its 'new policies
scenario'. Fossil fuels' share of the global energy mix would fall
still further to 65 per cent if we avoid dangerous climate change
of 2 degrees - the IEA's 450 scenario.
Gas consumption would be higher than it is today in
either case (purple line, below). But serious action to tackle
climate change would see oil consumption peak before 2020 (red
line). And coal use (brown line) would drop particularly sharply
after peaking around 2015, the IEA scenario suggests.
This means that in a 2 degree world - according to the IEA -
around $300 billion of investment in fossil fuel assets could be
"stranded". This figure could increase further if there is a lack
of clear policy in the interim which leads to investment in
exploration or generating capacity that is not needed.
Stranded assets - the biggest losers
The IEA estimates that the total amount stranded
by decarbonisation would be divided between money spent on
fossil-fuel power stations that have to close due to emissions
limits (dark blue), money spent exploring for oil but not paid back
because the oil can't be sold (light grey), spending on gas
exploration (light blue) and a small amount of lost investment in
coal mines (dark grey).
IEA World Energy Investment Outlook
Oil majors like Shell and Exxon
say they do not think their assets will
become stranded because they don't expect the world to take the 2
degree path. Shell tells Carbon Brief its position hasn't changed
following the IEA report.
It may say the same to the 767 investors represented
by global not-for-profit group the Carbon Disclosure Project. These
want oil and gas firms to reveal the true extent of their
exposure to potentially stranded assets.
Of course, whether assets become stranded or not
depends on whether the world enacts ambitious climate
Shell is still telling investors that it doesn't fear a
carbon bubble, based on the company's own
scenarios which predict up to six degrees of global warming this
If it is wrong the IEA analysis suggests it has a lot to