imately 20 percent of known fossil energy reserves totalling 2860 GtCO 2 This

Imately 20 percent of known fossil energy reserves

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imately 20 percent of known fossil energy reserves (totalling 2,860 GtCO 2). This creates a number of challenges for low-carbon development. The 200 largest fossil fuel companies globally (listed on stock exchanges) have a combined value of USD 4 trillion and debts worth USD 1.5 trillion. Equity valuations may have to be reduced by 40-60 per- cent to correspond to the 2-degree scenario. This would lead to credit rating downgrades for these companies, with potential debt servicing problems, in turn creating carbon vulnerability in global mar- kets. 20 This is problematic as current evaluations of companies are based on the full exploitation of proven reserves at a consistent production rate and price. If climate goals are to be met, it is not a mat- ter of if but when these fossil fuel assets are frozen. With the downgrading of fossil energy company bonds, debt default could lead to an international financial crisis. This report urges policy makers to initiate re-forms that can deal with such systemic uncertainty rather than assuming that everything will conform to the models of the past. Meanwhile, companies are still rewarded for finding and developing new fossil energy reserves, and market risks are accessed as if global warming were not an issue (Carbon Tracker, 2013). This situation is a symptom of carbon lock-in where markets, despite compelling evidence, are not convinced that governments are serious about climate change policy. These views are gaining wider acceptance (recently the carbon budget notion was embraced by the IPCC). How-ever, proven reserves are rising quickly as the global fossil energy industry is highly active in parts of the South such as South America, East Africa, and Eurasia, with the OPEC countries still controlling 70 GLOBELICS THEMATIC REVIEW
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two-thirds of known oil reserves (BP, 2013; Mitch- ell, Marcel & Mitchell, 2012). Developing coun-tries that have recently discovered fossil fuel energy reserves see them as a means for development by serving as a source of state income; these reserves supply domestic industry with cheap energy, and local policies are directed toward building new fos- sil energy-related industries. In these regions, ten- sions between low-carbon targets and economic development are obvious. From a global perspective, interactions between brown and green energy are becoming increasingly complex. The data indicate that it may be naïve to believe that fossil energy can be totally discarded in the short run. Still, the process of moving away from fossil energy needs to start now. Each country should make strategic roadmaps with milestones for short-, medium-, and long-term goals for the total decarbonisation of energy production with a gradually decreasing share of fossil energy whose efficiency is simultaneously improved. Still, it is unclear whether and how these dynamic trade-offs can be managed at both national and international levels. Research has hitherto mainly focused on the creation of new low-carbon technology and poli-cies rather than studying ‘the governance of termi-nation’
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