Business in oil, gas and coal is becoming increasingly unprofitable as global fossil reserves could lose around two-thirds of their value in the next 50 years, plummeting from around $39 trillion to $14 trillion, according to a study published on Thursday (4 May) by British think tank Carbon Tracker, Euractiv Germany reports.
The reason for the sharp drop in value is the oversupply and fall in demand for oil, while renewable energy sources are expanding.
In its study Carbon Tracker relied on the World Bank’s calculation models. However, these are based on the assumption that demand for fossil fuels will be in line with the Paris Climate Agreement and will fall by 2% annually, although this has never happened before.
Although gas imports to the EU increased by 8% in the last quarter, most of it in the form of liquefied natural gas (LNG), the International Energy Agency (IEA) expects a significant drop in primary fossil energy sources this year. The IEA’s report foresees that demand for oil could fall by 9%, while the need for coal and natural gas could decline by 8% and 5% respectively.
Every year, around $5 trillion is being invested in fossil infrastructure, the report states. The global fossil supply chain is worth $32 trillion, including the manufacture of power plants, cars, trucks, aircraft and ships, as well as the steel, cement, petrochemical and aluminium industries. This is backed by huge investments in the financial markets.
According to the study, almost a quarter of the global stocks and 53% of bonds worldwide are invested in the fossil fuel sector.