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The Coming Oil Shock?

There are those that argue that the major part of fossil fuel reserves are stranded. There are several arguments in support of this:

  • To limit climate change (and pollution, in the case of coal)
  • Prohibitively expensive
  • Investors are getting out
  • Rapid price declines in alternative energy

According to the IEA, to limit climate change to 2 degrees Celsius, one has to limit CO2 levels to 450 particles per million. The consequences for the fossil fuel industry are rather dramatic:

The IEA says that two-thirds of all fossil fuel reserves are rendered null and void if there is a deal to limit CO2 levels to 450 particles per million (ppm)... Chevreux's Mr Lewis said the fossil fuel industry would lose $28 trillion of gross revenues over the next two decades under a two degree climate deal, compared with business as usual. The oil companies would face "stranded assets" of $19 trillion.