Unburnable carbon
Investors in 2013 raised a concern about unburnable carbon – the argument that the carbon dioxide from burning all known fossil fuel reserves would raise global temperature by more than 2°C – and that potential greenhouse gas regulation to prevent this from happening could reduce the value of some of these reserves and the companies that own them.
We agree that burning all known reserves would probably cause global temperatures to rise by more than 2°C – and that addressing this issue will require the efforts of governments, industry and individuals. However, we believe that the unburnable carbon approach to assessing the impact of potential climate regulation on a company’s value oversimplifies the complexity of the issue and overstates the potential financial impact.