A new report by Scottish Environment LINK – the ‘voice’ of Scotland’s environment community – has warned the ‘carbon bubble’ could burst at any moment causing a financial shock that could cause huge damage to whole economy.
The inflation of the carbon bubble is blamed on a “policy vacuum” and an innate assumption that all the carbon in known reserves will be burned.
The report calls for government to send “strong, clear and certain signals” that there will be a change of direction towards a low carbon economy to make investment “shift towards clean energy and energy efficiency”.
It says: “The carbon bubble could burst at any time. It will burst when the market accepts that not all fossil fuels are going to be burned. Carbon based assets could become stranded assets and lose value overnight, causing a financial shock which could pose a threat to economies whose financial sectors are heavily dependent on the fossil fuel industry.
“It could happen quickly in response to an international political agreement which commits governments to urgent action, but it may not necessarily depend on international agreement. It could happen as a reaction to extreme weather events which trigger national political commitments to action, or it may be that market forces, cheaper alternatives (for example solar energy reaching grid parity) or general behaviour change may influence it.”
Matthew Crighton, Convener of the LINK’s Economic Taskforce, said: “When investors catch up with the reality of a low carbon future, the bubble could burst with knock-on consequences for the whole economy.”
Scottish Environment LINK is the forum for Scotland’s voluntary environment organisations, with over 35 member bodie, which include the RSPB, WWF Scotland and the Scottish Wildlife Trust.