An astonishing (and rather troubling) paper was published in Nature a few days ago. It traces the ownership of 43,439 oil & gas production assets through a financial system of 1.8 million companies, to their 'ultimate' owners. Then, it works out what would would happen to the value of these assets if the world moves to cut emissions and limit global heating to 2℃.
The authors used their analysis to figure out who ultimately owns these stranded assets - for example, managed funds, creditors, pensions and banks. They then propagated the effect of losses in asset valuation throughout the financial system of ownership. They found that in only a medium re-alignment of asset valuations, financial companies would face $681 billion of losses.
It turns out that once propagated through the finance industry, majority of these losses will be experienced by the UK and US - see the chart in the link.
So what does it mean? Either,
(a) Oil and gas fields remain at their current valuation, which is consistent with >3degrees of warming (immeasurable suffering all around) OR
(b) We decide to tackle climate change, i.e. oil and gas assets are currently mispriced and will re-align, sending shockwaves through financial portfolios and causing huge losses. Unfortunately not just for big financial institutions but for most individuals with a pension or investments.
There are nuances to the above of course. Great paper overall - Must Read.
First, and I really want this to be the first: thanks to the author for using colour-blind friendly colours for the figures. This is something a lot of people miss when doing papers and it's really troubling.
Second, although the highest losers would be the UK and the US it is worth pointing out that the USA would be affected by three times as much as the UK. I wonder if there isn't a better way to convey that information.
Third, and I think is this is very interesting, why aren't we seeing oil producing countries in the OPEC+ reflected in this? The reason is not evident from the images posted but is explained in the article:
> Low-cost Middle Eastern producers (Qatar, Saudi Arabia, Iran) display comparatively modest losses of less than US$50 billion because their production sites remain profitable and they engage in sell-off behaviour.
It is also mentioned that producing countries export their losses to OECD countries. Countries like the UK are massively invested from a financial perspective, without really bearing any of the consequences of extraction.
Another finally another interesting point:
> At stage 4, governments directly own (including via pension funds) losses of US$484 billion (34%), most of which originate in non-OECD countries. Private persons thus own over half the losses.
Who is making these decisions?
All in all, it shows how OECD countries and big finance has a massive interest in the current system of pollution to continue. It is quite a dire paper in that regard, because when it comes to money, nature has little chance. Oil companies, and probably the financial sector as well, have known for decades about the damage that this industry is causing and will cause the world but these financial incentives are so powerful... it's an addiction. To be honest, I don't think we are going to reach the 1.5 degree, not even 2 degrees, mark. It's sad, and what can I do as an everyday joe? Voting? What a joke.
It is indeed quite a pickle we are in. I agree with you on not reaching 1.5 but humanity has always surprised me and the world has reinvented itself over and over again so I have some faith that we will figure out a way forward in this case too.
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[ 3.6 ms ] story [ 21.7 ms ] threadThe authors used their analysis to figure out who ultimately owns these stranded assets - for example, managed funds, creditors, pensions and banks. They then propagated the effect of losses in asset valuation throughout the financial system of ownership. They found that in only a medium re-alignment of asset valuations, financial companies would face $681 billion of losses.
It turns out that once propagated through the finance industry, majority of these losses will be experienced by the UK and US - see the chart in the link.
So what does it mean? Either,
(a) Oil and gas fields remain at their current valuation, which is consistent with >3degrees of warming (immeasurable suffering all around) OR
(b) We decide to tackle climate change, i.e. oil and gas assets are currently mispriced and will re-align, sending shockwaves through financial portfolios and causing huge losses. Unfortunately not just for big financial institutions but for most individuals with a pension or investments.
There are nuances to the above of course. Great paper overall - Must Read.
First, and I really want this to be the first: thanks to the author for using colour-blind friendly colours for the figures. This is something a lot of people miss when doing papers and it's really troubling.
Second, although the highest losers would be the UK and the US it is worth pointing out that the USA would be affected by three times as much as the UK. I wonder if there isn't a better way to convey that information.
Third, and I think is this is very interesting, why aren't we seeing oil producing countries in the OPEC+ reflected in this? The reason is not evident from the images posted but is explained in the article:
> Low-cost Middle Eastern producers (Qatar, Saudi Arabia, Iran) display comparatively modest losses of less than US$50 billion because their production sites remain profitable and they engage in sell-off behaviour.
It is also mentioned that producing countries export their losses to OECD countries. Countries like the UK are massively invested from a financial perspective, without really bearing any of the consequences of extraction.
Another finally another interesting point:
> At stage 4, governments directly own (including via pension funds) losses of US$484 billion (34%), most of which originate in non-OECD countries. Private persons thus own over half the losses.
Who is making these decisions?
All in all, it shows how OECD countries and big finance has a massive interest in the current system of pollution to continue. It is quite a dire paper in that regard, because when it comes to money, nature has little chance. Oil companies, and probably the financial sector as well, have known for decades about the damage that this industry is causing and will cause the world but these financial incentives are so powerful... it's an addiction. To be honest, I don't think we are going to reach the 1.5 degree, not even 2 degrees, mark. It's sad, and what can I do as an everyday joe? Voting? What a joke.