Crimea, the carbon bubble and climate change
Two seemingly unrelated events suggest we might be at a tipping point for discussions about climate change. What does Russia’s effective capture of Crimea and a report from British MPs about a potential ‘carbon bubble’ in investment have in common?
Russia is able to flex its considerable muscles in Crimea because much of Europe and the Ukraine depend on Russian gas. The fragile recovery in the eurozone could be easily disrupted if President Putin feels cornered and decides to turn off the gas.
British MPs then issue a report concerning the so-called ‘carbon bubble’ in oil and gas stocks. Oil and gas companies make up a good percentage of investor portfolios and pensions. However, they are valued on assets they cannot extract safely and we certainly shouldn’t burn if we want to avoid runaway climate change, and the ruinous effect on our health from air pollution.
Our dependence on fossil fuels allows countries that control the supply of oil and gas to act against international law. It means regimes that we might wish to sanction for being militarily aggressive, anti-democratic or despotic, are free to act with impunity.
Fossil fuel dependence has been a source of multiple conflicts and thousands of deaths, both military and civilian. A country which is self-sufficient in abundant, distributed-generation, clean energy is harder to bully and unlikely to pursue expeditionary wars just to protect the flow of oil and gas.
The experience in Iraq and Afghanistan might have dampened the US’s desire to fight wars, but becoming energy self-sufficient with shale gas has reduced the need to put troops on the ground in petroleum states. They no longer have a “dog in this fight“.
Our dependence on fossil fuels means companies that cannot safely extract or even burn the resources upon which their valuations depend, threaten the portfolios and pensions of millions, and the economies in which they operate.
Outdated thinking means oil and gas companies have to succeed by extracting resources from increasingly remote and fragile environments, lest we accept that there will be a major downward correction in global share values. The economic, environmental and societal degradations of fossil fuels have been legion to date. They could be catastrophic in the very near future.
There is an alternative
Moving towards a low-carbon, clean energy, energy efficient economy means less reliance on finite resources, with volatile prices from unstable or unsavoury regimes. It also creates a new, fast-growth, sector into which funds divested from fossil fuels can flow.
A low-carbon, clean energy, energy efficient economy means enhanced national and global security and a sustainable industrial revolution with tens of thousands of new green collar jobs. More fundamentally, it addresses our disproportionate contribution to manmade climate change.
The UK may only contribute 2% of global carbon emissions today but we have just under 1% of the people. Much of what we consume (we represent 3.5% of global GDP) is manufactured elsewhere, allowing us to offshore most of our emissions. Two of the six oil supermajors are UK-based.
Our ingenuity created a fossil fuel-based industrial revolution, from which the world has benefited and then followed. Our ingenuity could lead and secure the sustainable industrial revolution that must now take place.
Crimea and the carbon bubble shows us just how vital and urgent this transition really is.
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