Fossil fuel industry facing $33trn hit after Paris climate deal

The fossil fuel industry is facing a $US33 trillion hit to its revenues over the next 20 years as a result of the COP21 global climate deal signed in Paris earlier in December, according to analysts at Barclays bank.

The international agreement, signed by 195 UN member states, was announced on Saturday 12 December and is designed to reduce greenhouse gas emissions and limit global warming.

Energy analysts from Barclays bank in the UK said the climate deal will see renewable energy scaled up and will cause investors to rethink new investments in fossil fuel options.

Lead analyst at Barclays bank Mark Lewis says the effects on the fossil fuel industry will be significant, and forecast a loss in revenue of around $US33 trillion up to 2040 compared to business as usual estimates.

The new report from Barclays said: “The upshot of the Paris Agreement will be a tightening of climate policy over time that should speed up the deployment of renewable and other zero and low-carbon energy sources and thereby accelerate the transition to a low-carbon global energy system that is already underway in any case.”

The implications will be felt most acutely in the oil sector which is estimated to lose $US22 trillion, with the gas sector losing $US6.1 trillion and the coal sector $US5.7 trillion.

The impact is mostly in relation to investments and projects that won’t go ahead, as opposed to existing assets.

The report continued: “The message from our analysis for fossil-fuel companies is that they will need to be increasingly cautious regarding future investments in high-cost, high-carbon projects, as these are the ones most vulnerable to future stranding under any future policy tightening of the carbon constraint. Moreover, given the sheer size of the numbers we are talking about here, it would not require a policy outcome in future climate negotiations to be fully in line with a 2°C world for the appropriate investment profile for fossil-fuel companies to change significantly.”

Lewis said that the main reason why a deal at COP21 was possible was because the costs for different renewable energy technologies had fallen significantly in the last decade.

Ther report added: “With the Paris Agreement now committing the Parties to a more ambitious long-term temperature objective than ever before, and to five-year reviews of their INDCs (national climate pledges) as a way of getting on track to meet that long-term objective, the ground has been laid for an ongoing tightening of climate policies globally over the next few decades.”