Could the New IPCC Carbon Budget Cause Another Recession?
A report released today by the Intergovernmental Panel on Climate Change (IPCC) provides a stark new picture of global warming’s effects on the environment. It also includes a revised “carbon budget” that could have dramatic ramifications for the global economy.
The carbon budget is the amount of carbon dioxide that climate scientists say humans can emit and still keep global warming below 2°C — a target that nearly every country on Earth, including the United States, has agreed to meet. IPCC has set the world’s carbon budget at 1 trillion tons.
The new number is a sharp increase over past estimates. Last spring, the Carbon Tracker Initiative out of London issued a report that put the carbon budget at 565 billion tons, which would to give the world an 80-percent chance of sticking below a 2°C temperature rise. In 2011, the International Energy Agency (IEA) came to a similar conclusion, staking the carbon budget at around 679 billion tons for a 75-percent chance keeping the global average temperature increase to 2°C.
Other estimates for the carbon budget have ranged from 225 billion tons (for listed fossil fuel companies, assuming proportional allocation based on reserves) to 900 billion tons of CO2, based on an assumption that society will be able to control other sources of greenhouse gas emissions, such as methane.
While the number seems to give more latitude for emissions, the IPCC is quick to note that more than half that amount has already been emitted since the advent of the Industrial Revolution. It also estimates that the trillionth ton will be emitted sometime around 2040.
The carbon budget could have profound implications for the global economy, according to a release by environmental group 350.org. Fossil fuel companies have nearly 3 trillion tons of carbon dioxide stored in known reserves of coal, oil, and gas — far more than any carbon budget suggested thus far. As IMT Green & Clean Journal reported in May, the IEA estimated that in order to stay within the budget, fossil fuel companies must leave 60 to 80 percent of their reserves underground, resulting in a massive write-off and potential loss in value. This has led some investors, consumers, and environmental groups to warn of what is being called a “carbon bubble.”
Lord Nicholas Stern, a professor at the London School of Economics, partnered with the Carbon Tracker Initiative this summer to issue a report warning that a carbon bubble could amount to trillions of dollars. ”The financial crisis has shown what happens when risks accumulate unnoticed,” he said in statement announcing the report. In an interview with British newspaper The Guardian, Stern claimed the risk was “very big indeed” and that regulators and investors were failing to address it.
The new carbon budget and the threat of a carbon bubble has added significant momentum to a movement to divest public institutions from the fossil fuel industry, led by environmental writer Bill McKibben, who also founded 350.org. His organization launched the campaign last fall and the movement has spread to over 300 colleges and universities and 100 cities and states in the United States, Australia, and Canada. More than 15 cities, six colleges, and numerous religious institutions, including the entire United Church of Christ, have already committed to dumping their fossil fuel holdings.
In an article written for the Daily Beast last week, McKibben called fossile fuel stocks “a bad bet.” He noted, “Those carbon numbers make clear that the industry sits on a bubble, with $20 trillion worth of fuel it can’t sell if the planet ever takes even minimal action against climate change.”
For environmental and liberal-minded organizations, the new carbon budget and the threat of the carbon bubble gives credence to the need for Environmental Protection Agency’s (EPA) new rules limiting power plant carbon emissions. EPA has set a limit of 1,100 pounds of carbon-dioxide per megawatt-hour of power produced. A typical coal-fired plant using the most advanced, proven technology emits about 1,800 pounds. Pro-business groups have fought back against the limits. The National Association of Manufacturers (NAM) recently said they ”a very dangerous precedent.”
Some business and conservative groups attacked the IPCC, calling the organization and its report “alarmist.” In its own study issued earlier this month, the Heartland Institute said claims about climate change made by IPCC were “exaggerated.” Based on its own research, the Heartland Institute insists, “Any warming that may occur is likely to be modest and cause no net harm to the global environment or to human well-being.”