Think-tank releases blueprint to support fossil fuel transition

by Search Gate staff. Published Thu 23 Apr 2016 16:05
Roadmap highlights the danger of fossil fuel investments
Roadmap highlights the danger of fossil fuel investments

Financial think-tank Carbon Tracker has released a ‘blueprint’ paper showing fossil fuel companies the benefit of stress testing their businesses using a set of low carbon, low price scenarios.

The report comes a week after HSBC published a research note on stranded assets that echoes many of the blueprint’s findings.

The blueprint, which primarily focuses on oil and gas, includes examining the impact of limiting global temperature rise to 2⁰C above pre-industrial levels.

The thrust of the roadmap paper puts the onus squarely on fossil fuel management to respond properly to how growing climate regulation, advances in cleaner technology, cheaper renewables, and greater energy efficiency hit demand and the implications those global trends have for commodity prices.

Its publication coincides with a major gathering this week of energy chiefs at the IHS-CERAWeek conference in Houston, Texas, and as oil companies back or prepare to support shareholder resolutions that test company resilience to climate change.

HSBC says fossil fuel companies, or some of their assets, will become “non-viable” or “unburnable”. HSBC says that's not just because of climate action, but also due to changing economics and the impact of new technologies, such as solar and storage.

The think tank has through its work warned that high-cost investments in oil sands, the Arctic, and deep-water exploration are at significant risk of not making an acceptable return. They have a real chance instead of becoming economically stranded amid volatile prices – a trend recently borne out by the oil price crash.

One of the paper’s central findings is that companies need to pursue capital discipline, focusing investment on high return projects and limiting exposure to low return ones. Carbon Tracker believes that some corporate investment decisions, which it views as high cost, call some company claims of capital discipline into question.

The launch of the financial think-tank’s first roadmap comes as BP adopts a shareholder resolution on the risks climate laws pose to its business and as Royal Dutch Shell gives its backing to a similar resolution to be voted on at its forthcoming AGM.

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