How Does It Compare with the Potential Emissions from Fossil Fuel Reserves & Resources?

This is the last step in our journey discussing the global carbon budget. And what we’re going to do in this last chapter is we’re going to compare the global budget for C02 energy emissions to stay within the 2-degree limit.

We’re going to compare that to the potential emissions embedded into the fossil fuel reserves and resources.

It’s a very important calculation to make because it gives an indication of the share of reserves and resources that we can use, that we can use without carbon capture and sequestration. But also very importantly those that would have to be used with carbon capture and sequestration or stranded. That means, that we would have to leave these resources under the ground. That we would have to leave them unexploited which of course would have very significant consequences for some companies and some countries.

So to do that we need to distinguish in between two things, two different types of categories of fossil fuel amounts. The first is the proven reserves of fossil fuels. So oil, coal, and gas. And the proven reserves are the amount that are already today economically viable under the current economic and technological conditions. This is different from the resources.

The resources are the amounts in addition to these proven reserves that would only become technologically accessible and are only potentially economically viable, for example, if the price of oil or the price of coal and gas and…increases and makes the exploitation of these resources economical.

So what is the C02 energy emissions that is potentially embedded into these reserves and resources? We need to use a single metric to compare the potential emission from different types of fossil fuels, from oil, and by the way, different types of oil, conventional and unconventional. The same for gas, conventional and unconventional. And also for coal because not all the coal has the same potential C02 emissions. In particular, lignite coal is much worse from C02 emission perspectives than other types of coal. But if we take all the fossil fuel reserves, the proven reserves together, they represent approximately 4000 to 7000 gigaton of potential C02 energy emissions, which is enormous. But the aggregate fossil fuel resources, so the amounts in addition to the proven reserves are even more enormous.

They represent approximately 30,000 to 50,000 gigaton of potential C02 energy emissions. So if we combine these two together to have the total, it means that the potential C02 that is embedded in the proven reserves and resources is as high as 35, 34,000, sorry, gigaton or 57 gigaton of C02. This is of course one or two order of magnitudes higher than the global C02 energy budget to stay within the 2-degree limit because let me remind you that we have calculated that it was a mere 950 gigaton of C02 equivalent which we need to compare with the potential emissions from the fossil fuel proven reserves and resources.

It means that this potential C02 is three to seven times larger than the global C02 energy budget if we limit the analysis to the proven reserves, but it is 35 to 60 times higher if we look at the total reserves and resources. So it is obvious that there are vastly more reserves and resources than we can safely use. We’re going to have to leave some of these resources under the ground.

This is a very unsettling truth, but this is very obvious from simply doing the math and looking at the global carbon budget for the 2-degree limit. I should mention that this conclusion that we’re going to have to strand some fossil fuel assets or leave them under the ground is true even if we allow for a significant share of geological sequestration of carbon.

If carbon capture and sequestration became available as we have already discussed, each component of the CCS technology is a well-known technology, but the potential for the geological sequestration, the scale of the geological potential for the sequestration of carbon is unknown.

But as a reference, the International Energy Agency 2-degree scenario assumes CCS of around a 125 gigaton of C02 until 2050. So…. And the IEA can be considered on the rather optimistic side of the feasibility of the deployment of CCS. But you see that this 125 gigaton doesn’t allow for the exploitation of all the resources and the proven reserves. I mean we’re talking of different orders of magnitudes here. So again, what is very clear from these numbers is that a very large fraction of these fossil fuel reserves and resources will have to stay under the ground because they’ll…. Even the already proven reserves are many times beyond the safe level of cumulative fossil fuel use.

And yet the energy sector invests hundreds of billions of dollars each year to discover and develop new resources and reserves, which is…raises the obvious question whether such investments are well directed or if they’re simply wasteful because the mean developing reserves that can never safely be used. What one would expect instead is that the fossil fuel industry is investing massively in the research and development of carbon capture and sequestration because this is what would allow to use a higher proportion of the existing reserves and resources. Of the three fossil fuels, the coal deposits will most likely have to be stranded in the highest proportion.

And this is for at least four reasons. The first is very simply that its reserves and resources levels are much higher than those of oil and gas and vastly greater than any plausible global C02 energy budget, even with carbon capture and sequestration.

The second reason is that the C02 per unit of energy of coal is much higher than that of oil and gas. It is 22% higher than oil and 68% higher than gas.

The third reason is that coal use has very serious adverse side effects beyond global warming, such as an air pollution that causes very severe disease burden. So there is a rationale, even beyond climate change to scale down the use of coal for power production in particular.

And the fourth and final reason is that most coal is used in relatively large stationary sources such as the power plants where there are lower carbon or even zero carbon substitutes that are pretty easy to identify as opposed to oil, for example, where it’s harder to see what could be the alternative even if there are some.

So given the substitutes for coal, it may soon be feasible, but in fact it may soon be necessary for many or most countries to stop building new coal-fire power plants, except if they’re coming with carbon capture and sequestration. Coal would not be the only fossil fuel that would have to be stranded. It’s also clear that the available oil and gas reserves, plus resources are very large compared to the global C02 energy budget. Yet it is a question, which of those oil and gas reserves will be stranded and which of them will be developed? And the efficient answer to the question is to deploy the lowest cost oil and gas, but one has to take into account their respective C02 content per unit of energy and the cost calculation, including a price on carbon emission.

And based on this calculation to leave the…to decide leaving the higher cost oil and gas in the ground. But it’s important to mention that the issue is not necessarily conventional versus nonconventional resources per se. It’s really the relative cost of the development and the extraction of the alternative that is important and needs to be taken into account.

What is also true is that stranding fossil fuel assets will have very high distributional consequences because not all countries are equal, vis-á-vis, fossil fuels, because some countries are net exporters of fossil fuels when some others are net importers. So a country with stranded fossil fuel reserves may lose a considerable amount of income. So the decision about how strand these assets and whether we do it through consumption type policy measures such as a price on common or if we do it through a production type of measure, for example, through production permits, we’ll have a very large distributional implications for sharing the global effort of emission reductions.

And it will need to be considered seriously and I would say much more seriously than was the case previously if we want to reach a successful agreement on climate change, because we really need to get the fossil fuel exporting countries such as the U.S., Canada, Russia or the Gulf countries back into the game of discussing seriously how we can reduce greenhouse gases emissions.

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