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Carbon Bubble could be bigger than 2008 Financial Crisis - Nature Study

written by Remo Bebié

In early June, a paper in Nature Climate Change made waves in the UK, warning that the carbon bubble may cost the global economy trillions and be worse than the 2008 Financial Crisis. This is expected to materialise even in the absence of tightening climate policy.

The authors identified increasingly cheap clean energy, paired with transport electrification and increasing fuel efficiency, as sufficient drivers in devaluing fossil fuel-related assets and predict the bubble is likely to burst before 2035. Its size will depend on the strength of climate policy (BBC, Times, Guardian, Independent).

Speaking to the Times, the study's lead author warned of destabilising herd behaviour that could amplify the crisis and advised that early action to deflate the carbon bubble would be prudent. Comparing exposure by economies, Canada is estimated to be most affected in the near term along with the United States. In the longer term Saudi Arabia and OPEC as a whole are projected to experience significant negative effects.

Source: Nature Climate Change, Macroeconomic impact of stranded fossil fuel assets, Supplementary Information

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