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Most fossil fuels will need to remain underground: comments from Warwick experts

A new paper in the journal Nature argues that most fossil fuels, such as oil, gas and coal, will need to remain in the ground if we are to meet the target of keeping global temperature rise to 1.5C. Professor Michael Bradshaw of Warwick Business School and Dr Caroline Kuzemko of Politics and International Studies give their expert view on the conclusions below.

Professor Michael Bradshaw of Warwick Business School said: "This paper updates the previous influential analysis by McGlade and Ekins in 2015 that provided estimates of whose fossil fuel reserves would be unburnable in a 2 degrees world. The updated analysis focuses on the Paris Agreement ambition of a 1.5-degree world and estimates how much and whose fossil fuel reserves must remain unextracted to have a 50% change of limiting global warming to 1.5 degrees by the end of this century.

"Their results suggest that 58% of oil, 59% of fossil methane gas and 89% of coal must are unextractable by 2050. They provide details on whose reserves are most likely to be left in the ground. This research follows on from the IEA’s recent Net-Zero scenario that suggested that there should be no investment in new oil and gas extraction.

"This research highlights what needs to be done if we are to meet the goals of the Paris Agreement, but it also provides evidence to highlight the size of the disconnect between the plans of the fossil fuel producing economies and the oil and gas industry and path to net-zero.

"There is an increasing gap between the climate change science and environmental movement, on the one hand, and the fossil fuel industry on the other. The former are demanding a much accelerated rate of decarbonisation to reduce the physical impacts of climate change; while the latter are betting that the lack of political will to address climate change will result in continuing demand for fossil fuels for decades to come.

"This highlights the trade-off between so called ‘transition risks’ that relate to the impact of falling demand for fossil fuels on asset prices and resource rents, and ‘physical risks’ that relate to the consequences of climate change. Ironically, many fossil fuel producers are some of the most vulnerable to those physical risk.

"The question is ‘what future’ are the oil and gas companies, those that invest in them and the countries that rely on export revenues planning for? Despite the current rhetoric of some, all the evidence suggests that it is not a 1.5 degrees world. As oil and gas demand peaks and falls there will be heightened competition for market share with the lowest cost producers winning out. Clearly, there will be winners and loser, which has important geopolitical implications that need careful consideration. The failure of the oil and gas producing economies to prepare for a world beyond hydrocarbons has significant implications for global economic and geopolitical stability.

"If the recent IPCC report was ‘code red’ for humanity in terms of the physical impacts of climate change, this research presents a similar warning to the fossil fuel industry that if the world takes rapid action to address climate change, they face an imminent existential threat to their current business models and future expectations. But that is a big ‘if.’

"The upcoming COP-26 meetings in Glasgow in November will provide a litmus test of the extent of global resolve to address climate change."

Dr Caroline Kuzemko of Politics and International Studies said:

  1. "Yes, we should follow the science – fossil fuels should remain in the ground."
  2. "Clean alternatives need to be sufficiently available before fossil fuels can be phased out"
  3. "The outcomes need to be carefully thought through: jobs will be lost; tax revenues from this form of energy will go – this differs between countries (though renewable and energy efficiency jobs can replace in many places)"
  4. "For countries, like the UK, that are fossil fuel producers there is a need to plan ahead and manage the social aspects of the transitions – making it a just transition."

9 September 2021

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