I was a participant in this forum at The University of Melbourne's Asia Pacific Social Impact Leadership Centre earlier this week.
Panelists included Professor Ross Garnaut, former Liberal leader Dr John Hewson, Tony Wood of the Grattan Institute and Jemma Green of Curtin University.
With $20 trillion of potentially stranded fossil fuel assets, the forum attracted a big and vibrant audience.
Tony Wood had this opinion piece in today's Financial Review (subscription may be required).
Prof Ross Garnaut (far left); Dr John Hewson (third from left); Peter Ryan, Jemma Green, Tony Wood, Ben Neville, Prof Nasser Spear, Deputy Dean Melbourne Business School. |
Here are my opening comments from the Carbon Bubble forum to set the scene for panelists and the audience:
The G20 Summit at the weekend and President
Obama’s success in getting the issue of climate change firmly on the agenda is
an important backdrop for us this evening.
Rather than seeing Tony Abbott shirtfront
Vladimir Putin as sections of the media seemed to expect in a physical sense –
it’s now looking as though Mr Abbott might have been the target of a shirtfront
from Mr Obama.
And just few days before at the APEC Summit
in China there was the unexpected development - that even took a few cynics by
surprise - when China and the US pledged to reduce or limit their carbon
emissions .
The US to cut by 26 to 28 percent below 2005
levels by 2025 – and China to cap emissions by 2030 or sooner.
So over the space of a week – perhaps we’re
seeing climate change and the short and long term impacts being taken a bit
more seriously.
It is of course significant that climate change made it into the G20's closing communique.
So when you think about the potential or
frightening reality of a “carbon bubble” you almost see your life flash before
your eyes.
How our lives and our high expectations
revolve around fossil fuels.
How most of us are conditioned to a world
that grinds along based on dirty coal, oil and gas.
How big business, industry, politicians and a
range of vested interests are locked in to immense wealth generated through
energy sources that are perhaps better suited to their genesis back in the
industrial revolution.
There was a key phrase journalists were using
at the APEC Summit.
It was “APEC blue” - as Chinese authorities
shut down factories and took cars and trucks off the road.
Dirty brown skies that could be mistaken for
an overcast day made way for a crisp blue Autumn sky you don’t always see in
Beijing – as China and the US prepared to announce their ambitious new targets
to slash emissions.
The APEC blue sky shows what can be done if
the world is watching – but of course turning aspirational targets and ambitions
into tangible and believe outcomes is another.
So here’s the issue we’re facing.
What would happen if to avoid the worst
impacts of climate change, governments agreed to accelerate their move away
from the use of fossil fuels?
What if renewable technologies started to
take over faster than expected and the supply of fossil fuels began to outstrip
demand quite dramatically as governments, industry and consumers took climate
change seriously and switched away?
A study by HSBC has estimated that if
remaining massive reserves of fossil fuels become redundant – they would become
unburnable or “stranded assets”.
HSBC has put a number on that – and it’s in
the realm of $20 trillion.
Devaluing those assets could end up halve the
sharemarket value of fossil fuel companies.
And if you though the Global Financial Crisis
sparked by the Lehman Brothers collapse in 2008 was bad – the Carbon Bubble according
to some experts would be a whole new world of pain.
So as the scientific evidence of climate
change begins to ramp up – just how seriously should we be taking the carbon
bubble?
And how should investors respond given that
superannuation funds are exposed and in turn – we’re all exposed in
terms of our retirement nest eggs.