Reviewing Our Budget

In the lead up to the IPCC 5th Assessment Report next week, let’s review the Unburnable Carbon report and remind ourselves how much carbon we have left to burn.

WHO: James Leaton, Nicola Ranger, Bob Ward, Luke Sussams, and Meg Brown, Carbon Tracker Initiative

WHAT: Measuring the amount of capital, assets and infrastructure that is currently overvalued and will be stranded or wasted when we act on climate change.

WHEN: 2013

WHERE: On the Carbon Tracker website

TITLE: Unburnable Carbon 2013: Wasted capital and stranded assets (open access)

As I’m sure all of you RtS readers are aware (and excited about!); the IPCC are releasing the first part of their 5th Assessment Report on Friday September 27th and then slowly drip feeding us chapter by chapter over the next year.

This is exciting for climate nerds like me because the last IPCC report came out in 2007, so it was looking at the state of climate science in a very different world – before the 2008 financial crash, before the weather started getting seriously weird and going haywire, before 98% of Greenland melted one summer, the Arctic Death Spiral, the failure of the 2009 Copenhagen talks…. yeah, a lot has happened since 2007.

So, in preparation for when this international ‘State of the Climate’ report comes out, I thought it would be good to look at the Carbon Tracker’s Unburnbable Carbon report from this year to remind ourselves of the budget of carbon we have left that we can spew into the atmosphere and still have a chance of not totally cooking the climate.

The Carbon Tracker report looks at two different budgets – if we want to have an 80% chance of not going beyond a certain amount of global warming, and if we want to have a 50% chance of not going beyond a certain amount of global warming. Given that we haven’t done much to lower global carbon emissions yet, I think we’ll push to a 50/50 chance of cooking our habitat (humans are great at procrastinating after all), but feel free to be optimistic and look at the 80% option.

Carbon budget from now until 2050 (from paper)

Carbon budget from now until 2050 (from paper)

If we start from the assumption that humanity will act to save ourselves and keep global warming at 2oC or less with a 50/50 chance, we have 1,075 Gigatonnes (Gt) of CO2 left to burn over the next 37 years.

Now, you might ask – what about carbon capture and storage? Everyone says that technology is going to be big! The Carbon Tracker people ran those numbers. The 2015 estimate for carbon capture and storage projects (CCS) is 2.25million tonnes of CO2 being sequestered over 16 projects. The idealised scenario for CCS is that it will be able to sequester around 8Gt of CO2 each year, which Carbon Tracker worked out would be 3,800 projects operating by 2050 and would only reduce the above carbon budgets by 125Gt. It definitely isn’t a ‘get out of jail free and burn the fossil fuels’ card.

Speaking of burning all the fossil fuels – how much do we have left? The World Energy Outlook, which gets released by the International Energy Agency each year estimated in 2012 (the 2013 report will be released in November this year) that there were total assets equivalent to 2,860Gt CO2 in the world. This is enough carbon to cook the atmosphere beyond 3oC and probably into the next mass extinction.

The report rightly points out that if we assume we want to save a livable climate and keep within the above carbon budgets, then between 65-80% of all the listed reserves for fossil fuel companies cannot be burned. It’s simple math: 2,860 is more than double the budget for keeping under 2oC with a 50/50 chance of blowing past the temperature.

But enough about trying not to cook the atmosphere – how about the important things – like what does it mean for financial markets?

Carbon Tracker looked at the capital expenditure by publicly listed fossil fuel companies to work out how much money is being spent trying to find new reserves of fossil fuels that will add to the list we can’t burn and are therefore being over-valued, because the market valuation assumes they will be burned and a profit will be made from burning it.

In 2012, the 200 listed fossil fuel companies spent $674billion on capital expenditure. $593billion of that was spent looking for more oil and gas, while $81billion of that was spent looking for more coal. If these kinds of spending continue (if the companies don’t admit that there is going to be an end to carbon pollution) over the next decade $6.74trillion dollars could be wasted looking for fossil fuels that have to stay in the ground.

As the authors say: ‘this has profound implications for asset owners with significant holdings in fossil fuel stocks’ because what investors are being sold is the lie that these reserves can be profitably sold and burned.

There’s also a lot of risk associated with this. Over the last two years, the amount of carbon being traded on the New York Stock Exchange has increased by 37% and in London it’s increased by 7%. This means that similar to the sub-prime loan crisis that precipitated the 2008 financial crash, all investors are exposed to carbon risk through the over-valuation of fossil fuel companies.

Map of oil, gas and coal reserves listed on world stock exchanges (from paper)

Map of oil, gas and coal reserves listed on world stock exchanges (from paper)

There’s a risk of carbon not being properly managed as a risk within stock portfolios which could create a carbon bubble that will burst as carbon starts being constrained, and there’s also the risk of stranded assets, where the fossil fuel companies sink all the capital expenditure into their projects only to find they can’t burn the carbon and there was no point in building the mine/gas well/oil platform in the first place.

The report states: ‘investors need to challenge the continued pursuit of potentially unprofitable projects before costs are sunk’. This makes sense also because oil and gas are becoming harder to get at (tarsands, tight oil, gas fracking, Arctic drilling), so the cost is going up and the profit margins are getting squeezed, unless the price of oil keeps climbing. This means that fossil fuels are going to increasingly become challenged by lower cost lower carbon options, because mining for sunshine is really not that hard.

So if we agree that we’ll stop burning carbon before we’ve cooked the atmosphere and therefore that means that 80% of the world’s fossil fuel reserves need to stay in the ground, what does it mean for the fossil fuel companies themselves?

Well, they may have some debt problems on the horizon. The report points out that even without a global climate change agreement the coal industry in the USA is looking increasingly shaky, just from new air quality regulations. They point out that if the business models unravel that quickly, these companies may have problems refinancing their debt when they mature in the near future (which is also a risk for investors). They point out that any company with tar sands exposure will also have stranded asset risk because the business model relies on high oil prices to be profitable.

Basically they show that traditional business models are no longer viable in energy markets that will be moving towards decarbonisation and that different information is going to be needed for investors to manage the risk of carbon in their portfolio.

In the final section of the report, Carbon Tracker gives a list of recommendations for investors, policy makers, finance ministers, financial regulators, analysts and ratings agencies for how we can avoid this financial carbon bubble. The recommendations include better regulation, shareholder engagement and resolutions, fossil fuel divestment, and better risk definition.

The full list of Carbon Tracker recommendations (click to embiggen) (from paper)

The full list of Carbon Tracker recommendations (click to embiggen) (from paper)

For what it’s worth, my recommendations would be to remove fossil fuel subsidies, stop looking for new reserves of carbon that we can’t burn and price carbon pollution. And as usual, stop burning carbon.


Pandora’s Permafrost Freezer

What we know about permafrost melt is less than what we don’t know about it. So how do we determine the permafrost contribution to climate change?

WHO: E. A. G. Schuur, S. M. Natali, C. Schädel, University of Florida, Gainesville, FL, USA
B. W. Abbott, F. S. Chapin III, G. Grosse, J. B. Jones, C. L. Ping, V. E. Romanovsky, K. M. Walter Anthony University of Alaska Fairbanks, Fairbanks, AK, USA
W. B. Bowden, University of Vermont, Burlington, VT, USA
V. Brovkin, T. Kleinen, Max Planck Institute for Meteorology, Hamburg, Germany
P. Camill, Bowdoin College, Brunswick, ME, USA
J. G. Canadell, Global Carbon Project CSIRO Marine and Atmospheric Research, Canberra, Australia
J. P. Chanton, Florida State University, Tallahassee, FL, USA
T. R. Christensen, Lund University, Lund, Sweden
P. Ciais, LSCE, CEA-CNRS-UVSQ, Gif-sur-Yvette, France
B. T. Crosby, Idaho State University, Pocatello, ID, USA
C. I. Czimczik, University of California, Irvine, CA, USA
J. Harden, US Geological Survey, Menlo Park, CA, USA
D. J. Hayes, M. P.Waldrop, Oak Ridge National Laboratory, Oak Ridge, TN, USA
G. Hugelius, P. Kuhry, A. B. K. Sannel, Stockholm University, Stockholm, Sweden
J. D. Jastrow, Argonne National Laboratory, Argonne, IL, USA
C. D. Koven, W. J. Riley, Z. M. Subin, Lawrence Berkeley National Lab, Berkeley, CA, USA
G. Krinner, CNRS/UJF-Grenoble 1, LGGE, Grenoble, France
D. M. Lawrence, National Center for Atmospheric Research, Boulder, CO, USA
A. D. McGuire, U.S. Geological Survey, Alaska Cooperative Fish and Wildlife Research Unit, University of Alaska, Fairbanks, AK, USA
J. A. O’Donnell, Arctic Network, National Park Service, Fairbanks, AK, USA
A. Rinke, Alfred Wegener Institute, Potsdam, Germany
K. Schaefer, National Snow and Ice Data Center, Cooperative Institute for Research in Environmental Sciences, University of Colorado, Boulder, CO, USA
J. Sky, University of Oxford, Oxford, UK
C. Tarnocai, AgriFoods, Ottawa, ON, Canada
M. R. Turetsky, University of Guelph, Guelph, ON, Canada
K. P. Wickland, U.S. Geological Survey, Boulder, CO, USA
C. J. Wilson, Los Alamos National Laboratory, Los Alamos, NM, USA
 S. A. Zimov, North-East Scientific Station, Cherskii, Siberia

WHAT: Interviewing and averaging the best estimates by world experts on how much permafrost in the Arctic is likely to melt and how much that will contribute to climate change.

WHEN: 26 March 2013

WHERE: Climactic Change, Vol. 117, Issue 1-2, March 2013

TITLE: Expert assessment of vulnerability of permafrost carbon to climate change (open access!)

We are all told that you should never judge a book by its cover, however I’ll freely admit that I chose to read this paper because the headline in Nature Climate Change was ‘Pandora’s Freezer’ and I just love a clever play on words.

So what’s the deal with permafrost and climate change? Permafrost is the solid, permanently frozen dirt/mud/sludge in the Arctic that often looks like cliffs of chocolate mousse when it’s melting. The fact that it’s melting is the problem, because when it melts, the carbon gets disturbed and moved around and released into the atmosphere.

Releasing ancient carbon into the atmosphere is what humans have been doing at an ever greater rate since we worked out that fossilised carbon makes a really efficient energy source, so when the Arctic starts doing that as well, it’s adding to the limited remaining carbon budget our atmosphere has left. Which means melting permafrost has consequences for how much time humanity has left to wean ourselves off our destructive fossil fuel addiction.

Cliffs of chocolate mousse (photo: Mike Beauregard, flickr)

Cliffs of chocolate mousse (photo: Mike Beauregard, flickr)

 How much time do we have? How much carbon is in those cliffs of chocolate mousse? We’re not sure. And that’s a big problem. Estimates in recent research think there could be as much as 1,700 billion tonnes of carbon stored in permafrost in the Arctic, which is much higher than earlier estimates from research in the 1990s.

To give that very large number some context, 1,700 billion tonnes can also be called 1,700 Gigatonnes, which should ring a bell for anyone who read Bill McKibben’s Rolling Stone global warming math article. The article stated that the best current estimate for humanity to have a shot at keeping global average temperatures below a 2oC increase is a carbon budget of 565Gt. So if all the permafrost melted, we’ve blown that budget twice.

What this paper did, was ask the above long list of experts on soil, carbon in soil, permafrost and Arctic research three questions over three different time scales.

  1. How much permafrost is likely to degrade (aka quantitative estimates of surface permafrost degradation)
  2. How much carbon it will likely release
  3. How much methane it will likely release

They included the methane question because methane has short term ramifications for the atmosphere. Methane ‘only’ stays in the atmosphere for around 100 years (compared to carbon dioxide’s 1000 plus years) and it has 33 times the global warming potential (GWP) of CO2 over a 100 year period. So for the first hundred years after you’ve released it, one tonne of methane is as bad as 33 tonnes of CO2. This could quickly blow our carbon budgets as we head merrily past 400 parts per million of CO2 in the atmosphere from human forcing.

The time periods for each question were; by 2040 with 1.5-2.5oC Arctic temperature rise (the Arctic warms faster than lower latitudes), by 2100 with between 2.0-7.5oC temperature rise (so from ‘we can possibly deal with this’ to ‘catastrophic climate change’), and by 2300 where temperatures are stable after 2100.

The estimates the experts gave were then screened for level of expertise (you don’t want to be asking an atmospheric specialist the soil questions!) and averaged to give an estimate range. For surface loss of permafrost under the highest warming scenario, the results were;

  1. 9-16% loss by 2040
  2. 48-63% loss by 2100
  3. 67-80% loss by 2300
Permafrost melting estimates for each time period over four different emissions scenarios (from paper)

Permafrost melting estimates for each time period over four different emissions scenarios (from paper)

Ouch. If we don’t start doing something serious about reducing our carbon emissions soon, we could be blowing that carbon budget really quickly.

For how much carbon the highest warming scenario may release, the results were;

  1. 19-45billion tonnes (Gt) CO2 by 2040
  2. 162-288Gt CO2 by 2100
  3. 381-616Gt CO2 by 2300

Hmm. So if we don’t stop burning carbon by 2040, melting permafrost will have taken 45Gt of CO2 out of our atmospheric carbon budget of 565Gt. Let’s hope we haven’t burned through the rest by then too.

However, if Arctic temperature rises were limited to 2oC by 2100, the CO2 emissions would ‘only’ be;

  1. 6-17Gt CO2 by 2040
  2. 41-80Gt CO2 by 2100
  3. 119-200Gt CO2 by 2300

That’s about a third of the highest warming estimates, but still nothing to breathe a sigh of relief at given that the 2000-2010 average annual rate of fossil fuel burning was 7.9Gt per year. So even the low estimate has permafrost releasing more than two years worth of global emissions, meaning we’d have to stop burning carbon two years earlier.

When the researchers calculated the expected methane emissions, the estimates were low. However, when they calculated the CO2 equivalent (CO2e) for the methane (methane being 33 times more potent than CO2 over 100 years), they got;

  1. 29-60Gt CO2e by 2040
  2. 250-463Gt CO2e by 2100
  3. 572-1004Gt CO2e by 2300

Thankfully, most of the carbon in the permafrost is expected to be released as the less potent carbon dioxide, but working out the balance between how much methane may be released into the atmosphere vs how much will be carbon dioxide is really crucial for working out global carbon budgets.

The other problem is that most climate models that look at permafrost contributions to climate change do it in a linear manner where increased temps lead directly to an increase in microbes and bacteria and the carbon is released. In reality, permafrost is much more dynamic and non-linear and therefore more unpredictable, which makes it a pain to put into models. It’s really difficult to predict abrupt thaw processes (as was seen over 98% of Greenland last summer) where ice wedges can melt and the ground could collapse irreversibly.

These kinds of non-linear processes (the really terrifying bit about climate change) made the news this week when it was reported that the Alaskan town of Newtok is likely to wash away by 2017, making the townspeople the first climate refugees from the USA.

The paper points out that one of the key limitations to knowing exactly what the permafrost is going to do is the lack of historical permafrost data. Permafrost is in really remote hard to get to places where people don’t live because the ground is permanently frozen. People haven’t been going to these places and taking samples unlike more populated areas that have lengthy and detailed climate records. But if you don’t know how much permafrost was historically there, you can’t tell how fast it’s melting.

The key point from this paper is that even though we’re not sure exactly how much permafrost will contribute to global carbon budgets and temperature rise, this uncertainty alone should not be enough to stall action on climate change.

Yes, there is uncertainty in exactly how badly climate change will affect the biosphere and everything that lives within it, but currently our options range from ‘uncomfortable and we may be able to adapt’ to ‘the next mass extinction’.

So while we’re working out exactly how far we’ve opened the Pandora’s Freezer of permafrost, let’s also stop burning carbon.