SYDNEY, April 30 (UPI) —
Australia’s coal sector could face a "carbon bubble" based on the internationally agreed-upon target of limiting global warming to 2 degrees Celsius, a new report warns.
The report "Unburnable Carbon: Australia’s carbon bubble," by the Carbon Tracker Initiative and the Climate Institute says the country’s coal reserves are already more than double their market share of the precautionary global carbon budget for coal.
Its release coincides with a round of international climate change talks in Bonn, Germany, this week. It also follows a report from Climate Tracker and the Grantham Institute that says $674 billion was spent on exploring and developing new fossil fuel reserves around the world in 2012.
But after fossil fuels from state-owned projects are factored in, the earlier report says, private firms will need to leave unused 60-80 percent of the coal, oil and natural gas they are developing in order to meet the target of limiting global warming to 2 degrees Celsius.
The new report says that there is 51 gigatons of carbon pollution contained in Australian coal companies’ reserves, representing about 25 percent of a global carbon budget for coal.
Yet Australian coal exports represent 11 percent of the global market.
"There is a clear unbalance between the current level of Australia’s coal production and their share of a global coal budget," said principle author Luke Sussams told officials Chinese news agency Xinhua. "To us, this says that Australian coal companies are planning for a 5-6 degree (Celsius) future," instead of the 2-degree threshold.
"We feel this is a really risky assumption which is fundamental to the future financial value of these companies," he said.
Because of the "stranding of coal assets" in Australia under a 2-degrees scenario, Sussams said the report found that mining giants BHP Billiton and Rio Tinto could lose 4-5 percent of their market value.
The report also recommends that companies disclose the emissions potential of fossil fuel reserves.
"Australian and overseas investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming," said John Connor, chief executive of the Climate Institute said in a statement. "Investors, governments and even some coal companies say they take climate change seriously, but this report shows they do not or are taking risky gambles."
A Greenpeace report in January included the Australian mining sector’s "dirty plan" to more than double its coal exports in a little more than 10 years as one of 14 global "carbon bombs" that could push global warming past the two degree threshold. The coal port expansion, Greenpeace said, would add an additional 900 million tons of carbon a year to the atmosphere.