1. The global carbon budget
The Cancun Agreement in December 2010 captured an international commitment to limit global warming to two degrees Celsius (°C) above pre-industrial levels. It also noted the potential need to tighten this target to 1.5°C.1 This agreement provides a reference point against which global emissions scenarios can be compared to assess whether the world is on track to achieve the two degrees target. We are focused on how the world’s financial markets are aligned with this pathway as it is clear a shift to a low carbon economy needs capital markets to rise to this challenge. The Potsdam Climate Institute has calculated a global carbon budget for the world to stay below 2°C of warming.
This uses probabilistic climate change modelling to calculate the total volume of carbon dioxide (CO2) emissions permitted in the first half of the 21st century to achieve the target. This revealed that to reduce the chance of exceeding 2 °C warming to 20%, the global carbon budget for 2000 -2050 is 886 GtCO2.2 (N.B. All emissions are expressed in carbon dioxide only, rather than the equivalent of the full suite of greenhouse gases.)
What have we already used since 2000?
By 2011, the global economy has already used up over a third of that 50 year budget in the first decade alone. Calculations of global emissions published in Nature indicate 282 GtCO2 have already been emitted in the first decade of this century from burning fossil fuels, with land use change contributing a further 39 GtCO2.3 This leaves a budget of around 565 GtCO2 for the remaining 40 years to 2050. This budget could be further contracted if a position is adopted to limit global warming to 1.5°C or even lower.
What are the potential emissions from global fossil fuel reserves?
The Potsdam Climate Institute also calculated the total potential emissions from burning the world’s proven fossil fuel reserves (coal, oil and gas). This is based on reserve figures reported at a country level and UNFCCC emissions factors for the relevant fossil fuel types. Oil was split into conventional and unconventional types, whilst coal was split into three different bands to reflect the range of carbon intensity.
The total CO2 potential of the earth’s proven reserves comes to 2795 GtCO2. 65% of this is from coal, with oil providing 22 % and gas 13%. This means that governments are currently indicating their countries contain reserves equivalent to nearly 5 times the carbon budget for the next 40 years. Consequently only one-fifth of the reserves could be burnt unabated by 2050 if we are to reduce the likelihood of exceeding 2°C warming to 20%.