Global push to net zero will trigger fossil fuel crash and fastest adopters of renewables will win big, study finds

About half of the world’s fossil fuel assets may become worthless in fifteen years as countries rapidly transition to renewables under net zero policies, according to new research.

The new paper, published in Nature Energy on Thursday, said the decarbonising efforts adopted by countries will slow down the demand for fossils, making the prices more volatile. Continuing with excess production may lead to “unburnable” stranded assets, making them worthless by 2036, it added.

The paper estimated that the risk of producing far more oil and gas than required for future demand would lead to a massive £8.1 trillion to £10.3 trillion worth of stranded assets, including infrastructure, property and investments where the value has fallen so steeply that they must be written off.

The lead author of the paper added that if the world continued to produce fossils, and economies kept depending on it while the value fell, it may trigger a financial crisis similar to the one in 2008.

“In a worst-case scenario, people will keep investing in fossil fuels until suddenly the demand they expected does not materialise and they realise that what they own is worthless. Then we could see a financial crisis on the scale of 2008,” Jean-Francois Mercure of the University of Exeter warned.

Carbon makes up the vast majority of greenhouse gases emitted and with the recent push for net zero targets at the Cop26 summit in Glasgow, all of the world’s major fossil producing and consuming countries are now looking to reduce their emissions.

Renewables are also becoming cheaper, as the paper points out. However, the concentration of technology remains a key issue.

Most nations possess sizeable technical potentials for one or more types of renewable energy sources, which reduces the likelihood of any state gaining important control over future energy supplies, the paper said. However, it also pointed out that the speed of the transition and the decline in the value of fossils will depend on energy importers such as China, India, Japan and the EU.

“These have an economic incentive to decarbonise and their decisions impact producers in general,” the study noted, referring to their carbon emission reduction targets.

The study also illustrated how a drop in demand for oil and gas before 2036 will reshape the geopolitical landscape. Current investment flows and government commitments to reach net zero emissions by 2050 will make renewable energy more efficient, cheaper and stable, while fossil fuels will be hit by more price volatility.

Source: Independent.co.uk

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