By Courtney Pearson
ALL necessary fossil fuel projects have already been developed, and companies risk wasting US$2.2 trillion in the next decade on ”stranded assets”, according to thinktank Carbon Tracker.
The $2 trillion stranded assets danger zone: How fossil fuel firms risk destroying investor returns report by Carbon Tracker also predicted that oil demand would peak about 2020 and growth in gas would disappoint industry expectations.
The demand for energy could already be met through existing coal mines; future capital expenditure of US$177 billion on new projects and $42 billion on existing ones was unnecessary, according to the report.
Australia, the US and China accounted for 90 per cent of this unnecessary investment.
“Our work shows thermal coal has the most significant overhang of unneeded supply in terms of carbon of all fossil fuels on any scenario,” Carbon Tracker advisor and former Deutsche Bank Climate Change Advisors head of research Mark Fulton said.
“No new mines are needed globally in a 2 degrees Celsius world.”
Miners Glencore, Peabody and Coal India were named as the biggest risk in demand misreads to the climate and shareholders.
The report found that Australia had US$103 billion of unneeded fossil fuel projects to 2025 that were at risk of becoming stranded assets, followed by the US (US$412 billion), Canada (US$220 billion), China (US$179 billion) and Russia (US$147 billion).
“If the industry misreads future demand by underestimating technology and policy advances, this can lead to an excess of supply and create stranded assets,” the report warned.
“This is where shareholders should be concerned – if companies are committing to future production which may never generate the returns expected.”
Australia’s coal industry directly employs 41,000 people, powers 71 per cent of grid electricity across the country and is the largest energy export earner.
In the 2017 financial year Australian producers are expected to export about $56 billion of coal.
Carbon Tracker calls itself an independent financial think tank of financial, energy and legal experts providing “in-depth analysis on the impact of climate change on capital markets and investment in fossil fuels, mapping risk, opportunity and the route to a low carbon future”.