The world’s top climate change scientists are now 95 percent certain that humans are responsible for global warming. That’s the headline takeaway from the latest findings by the Intergovernmental Panel on Climate Change. Global temperatures are the hottest since the last ice age and the planet is only getting warmer.

What to make of this news? On one hand, it’s likely not much of a surprise to most of us. Extreme weather events like superstorm Sandy are becoming more commonplace. Glaciers are melting, drought is gripping more parts of the world, and the amount of Arctic sea ice shrinks more each year.

A warming planet clearly holds profound consequences for us all, but one group that should by paying particular attention are the world’s energy producers. The details of the IPCC’s findings take direct aim at the long-term value of fossil fuel reserves.

The IPCC has put new numbers to the planet’s so-called carbon budget. To limit the rise in average global temperatures to 2 degrees Celsius from preindustrial levels, the IPCC says we can burn no more than 1 trillion tons of carbon. The bad news is that we’ve already combusted more than half that amount. At our current rate of fossil fuel consumption, we’ll burn through the rest in less than three decades.

Global energy producers have already found more than enough reserves to ensure we can blow past this mark without breaking a sweat. Even after using up our carbon quota, it’s estimated the world will still have 2.5 trillion tons of carbon waiting to burn. Every year, moreover, producers add to global reserves, whether through unlocking natural gas shale formations, oil sands bitumen plays, or drilling deep into the ocean floor. It’s worth asking, though, are these carbon reserves really valuable resources or will they end up as stranded assets?

The energy industry — oil, natural gas, and coal producers — will undoubtedly dismiss the report as alarmist. The IPCC’s findings, though, aren’t fundamentally different from those of the International Energy Agency, a bunch that’s typically much more sympathetic to energy producers. Under current policies, the IEA puts the chances of holding global temperature increases to less than 2 degrees — the threshold at which global warming tips us into the danger zone — at a scant 2 percent.

Executives at energy companies are quick to trumpet their fossil fuel reserves to investors. From a market perspective, it’s easy to understand why. Carbon reserves, be they oil, coal or natural gas, are valuable assets that will generate future cash flow for owners. Indeed, proven reserves play a large part in determining the market valuations of energy stocks. A much more rare occurrence, though, is hearing executives discuss the carbon footprint that will result from combusting those same reserves. That side of the ledger, according to the IPCC report, is becoming a more pressing liability.

We can hope the world won’t just blithely continue to emit ever-increasing amounts of carbon into the atmosphere, given the environmental threat it poses to the planet. Nature’s feedback loop, whether it’s storms, droughts, or flooding, is already sending a stark message. How long will it be before world leaders start listening in earnest and come up with a whole new set of rules for carbon emissions?

When that happens, what will it mean for the present value of hydrocarbon reserves that currently buoy the balance sheets of global energy companies? Just look at the sinking share prices of U.S. coal firms following the Environmental Protection Agency’s tough new standards for carbon emissions for a glimpse of what’s likely to come.

If the world’s scientific community is 95 percent certain that future carbon emissions will bring about further climate change, then investors should be 95 percent certain that carbon reserves will be valued a lot differently tomorrow than they are today.

  • Can I ask a question

    We read your recent article on Huffington Post as well. Invite you to the CIQ transform that was released over 4 weeks ago that shows the creation of net new job category of “Market Makers” — Hundreds of thousands, starting as soon as we get people to see! There are two that are already working in Mississauga and we still wondering why there are line ups for jobs when it’s all there! Right here in Canada, in the US and foreign workers don’t even qualify because the core requirement for a Market Maker is to understand competitive markets — Something every Canadian and US citizen grew up with but not exactly taught freely in places like China or India or Brazil or Russia or Romania, Serbia, Indonesia, Pakistan, …. But our kids can easily use market making tools and techniques from right here and plant seeds of competition and MAKE MONEY and we don’t even have to train them on “Free Markets” concept.

    First Market Maker jobs were created by a genius by the name of Glen Meakem over a decade ago, you can look him up (please don’t “google” him, use “Wikipedia” instead) and there is a link on our forum for his current coordinates as well. He later sold FreeMarkets for $500 Million.

    So it is all there but we are having trouble people seeing the world from non-PetroDollar perspectives. Can you help?

  • scissorpaws

    Can you imagine what it would take to get all the world’s nations to agree on a global carbon tax? Convince the Republicans in the US, Harperites in Canuckistan to cough up cash that would go to China and Russia? You think achieving affordable health care in the US was a smidge of a miracle it was falling off a log by comparison. JC could descend from a cloud with written instructions written on tablets and you likely couldn’t sell it. In Texas they want to teach Adam and Eve in science class. You can probably find a few bookies offering wonderful odds against that happening in the next three decades. Natural Gas get cleaner every day, apparently. Coal is now clean. And carbon sequestering, the magic solution along with spritzing the high atmosphere with sulphur dioxide crystals and dumping iron ore in the oceans, will make it unnecessary to alter our lifestyles one iota. That’s the mantra, what you’re up against. And that’s just the science. Then there’s economics. A prudent species with only one planet and one atmosphere for habitation would be playing this game far more conservatively, investing in global infrastructure for hydrogen production via electrolysis from electricity generated from any renewable resource. Piped and shipped and burned in everything from cars to furnaces from unlimite seawater to hydrogen/oxygen and back to water. A perfect loop, no exhaust, no waste.

  • rigpigpetey

    Can I ask a question Jeff?


  • jaba2872

    Ok Jeff…I can now see by your blogs over the past year that you have clearly lost your sharp intellect. You are no longer that brilliant balanced mind who knew how to analyze business not sudo or vodo economics as it applies to you understanding of the great fraud called global warming.

    I asked you awhile back if you found the Eco God. Clearly you have. You are on the Suzuki crazy train.

    Jeff, engage us in good economic discussion or step off and let some one else do it and hang out in the wild and tell us more fishy stories about how you and your son went fishing in BC.

    Tell us where you position yourself now on Canada’s resource sector oil/gas/mining and how we can deliver these resources in an environmental prudent and safe way and help Canada become more successful in delivering these resources to the world.

    You have jumped on this Coom By Ya movment that makes you sound silly.

  • jaba2872

    Thanks rigpigpetey….I am glad to see that someone else is asking Jeff…WTF….I have no idea what happened to this once informative mind on Canadian resources and global business….

    He goes fishing w/his son in BC and comes back and believes that he’s found the eco God….

  • Doug

    Actually this post IS good economic discussion. Any good economist must look at the whole picture in order to assess what’s going on now and make any attempt at predictions. By looking at the possible consequences of continuing to burn fossil fuels unabated (yes, climate change will have economic consequences) or not burning fossil fuels that are known to exist (which will also have economic consequences), Jeff has posted not just good but outstanding economic discussion here.

  • GTI

    or he just agrees with 95% of climate scientists, you know, the guys with PHD’s in the type of stuff that confuses you and tend to be highly intelligent? A look at the cost of fixing damage from environmental damage would lead an educated person to determine that the cost of prevention is better than the cure. There is a long list of environmental problems causing the destruction of civilizations, the Easter Islands, the Mayans, the Anastazi and more. And the cost of mining clean ups has repeatedly proven to be so high that companies go bankrupt and leave the government (who then gets it from us) to clean up the mess.
    It is not about hugging a bunch of trees, it is about looking at true costs, which would include damages done that will bear a price later.
    but, why bother you with silly facts, when you obviously know more than the people who have studied it all their lives.

  • Joe
  • Instincts

    People like ‘rigpig’ and ‘jaba’ who post constantly post negative remarks about Jeff’s columns are known in society as ‘bullies’. It is a well known fact that bullies behave the way that they do (repetitive, aggressive, negative, harmful) because they feel threatened by someone else in some manner (often by another’s intellegence or other advantageous abilities).

    In the case of ‘rigpig’ and ‘jaba’ (who by the way chose to post here; Jeff did not solicit them to do so), they feel threatened because what Jeff has come to know as an economist, is what many others in numerous other fields of discipline have come to know — the simple fact that infinite ‘growth’ of an economy and infinite depletion of any substance or resource on planet earth is impossible given the physical, chemical, and biological limitations on a finite planet such as earth.

  • jaba2872


    WOW!! how overly simplistic you are with your retort. This is nowhere near the definition of bulling (which is now an over used and hyper emotional word generally reserved for children) and you have certainly overused and over stated the definition.

    When someone like JR puts himself out there on a blog like this, he knowns full well that he will have people who will disagree and challenge him.

    This has nothing to do with being threatened (Although I do wonder the age of the person I am engaging with here who would even state something like this without sourcing anything) has everything to do with what JR has been saying and expressing in his last posts.

    I have watched and listened to him for many years on many business shows and in business mags. He is being challenged here and has not come clean w/ the industry as a whole and people who have listed to his discussions and insights in the oil/gas sectors about his new positioning on oil/gas and how it and should benefit Canada.

    He has for over a decade commended Canada’s energy sector and it’s benefits to Canada. I take no issue that all mining needs to be done with the best environmental concerns and laws to be followed and applied. I believe that there is a middle ground to this. JR is using code here that is difficult to now get his true belief about our oil/gas industry. One would think (reading between the lines) that he now believes that the oil sands should shut down outright. I am asking him to sate his real beliefs here now as he was an ardent supporter of Alberta oil sands and Canadian oil/gas.

    So take a chill pill my hyper, hysterical emotional and I would venture to say, eco extremists and get with the real discussion and debateIt is about Canada’s energy sector and it’s viability and yes environmental responsibility moving forward

  • rigpigpetey

    @ jabs
    we’re bullies??
    wow is right,…………..

    i enjoy the part of his “soliloquy” to himself about us being “threatened by intelligence and advantageous abilities”,……….

    seems like a broader concept of us stealing someones lunch money,……

    we could make a movie out of that?

  • jaba2872

    Ok, simplistic style of a retort…you missed this one altogether…we are done…send me your best again…cheers

  • petraardvark

    excellent rejoinder rigpig, care to elaborate some more?

  • petraardvark

    have you read The End of Growth? I have, he comes out in favour of Keystone, though not Gateway and primarily for the reasons that the Canadian oil industry is being short-changed. Because the pipelines are only to Cushing and not the Gulf Coast the refineries get the benefit of the discount.

    Also due to the Canadian discount and the surplus from the shale gas oil – the US is now exporting 3.2 million barrels of gasoline a day.

    Doesn’t matter if you think the debate is about Canada’s energy sector. It is about a lot more than that. You only have to look at the past and the min-management of various resources, because of the tragedy of the commons. For instance the east coast fisheries, the degradation of the soils leading to the dust bowl of the 30s. There are plenty of past societies that have collapsed because of improper soil management or even minor climate shifts. None of them expected it either.

  • Guest

    The world is going to stop burning carbon because scientist say it is bad. I am sure 95% of scientist would also agree that war is bad. Yet the world has been unable to stop that.

  • endwether

    The world is going to stop burning fossil fuel because scientists say it is bad. I am sure close to 95% of scientists would also agree that war is bad. Yet we still have wars. Go figure.