Corporate Knights ‘In 2012, the International Energy Agency’s World Energy Outlook report legitimized the notion of unburnable carbon in one sentence: “No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2°C goal, unless carbon capture and storage (CCS) technology is widely deployed.”
On Jan. 19 that year, a group of investors wrote a letter to the governor of the Bank of England, Mervyn King, requesting that its Financial Policy Committee look into the systemic economic risks of certain carbon-based assets being stranded. Less than two weeks later, King replied with his own letter assuring that the bank would further evaluate the risk of stranded assets. He also outlined the three key conditions by which the unburnable carbon thesis could plausibly have adverse effects on the economy:
- The economy is significantly exposed to carbon-intensive sectors;
- Markets are not already pricing the risk of stranded assets;
- Any subsequent correction would occur too quickly to allow for an orderly adjustment.
Fast forward to Oct. 30, 2014. Mark Carney, the new Bank of England governor, makes international headlines by stating “the vast majority of reserves are unburnable if global temperature rises are to be limited to below 2⁰C.” Three days later, Carney committed in writing to monitor the financial risk of unburnable carbon, referencing the Bank of England’s in-depth first draft report on the subject targeted for July 2015.’ To read more go to