What is the 'carbon bubble' — and why is it not a conspiracy theory?
The term 'carbon bubble' did not originate from climate activists or ideologically driven academics. It was first formally introduced by the Carbon Tracker Initiative in 2011 — a London-based financial think tank composed of former Goldman Sachs analysts, World Bank economists, and climate risk experts. The term refers to a *systemic mismatch* between the stock market value of fossil fuel companies and the physical and regulatory realities of climate change. In short: the market still values companies like ExxonMobil, Shell, or Petronas as if all their oil and gas reserves will be fully sold — even though, according to the IPCC report and the Paris Agreement, only around 20% of global fossil fuel reserves can be burned if the world wants to keep warming below 1.5°C. The rest — approximately USD26 trillion in assets (Bank of England, 2022) — are 'stranded assets': assets that physically exist, but economically cannot be used. This is not speculation. It is an calculation based on scientifically verified carbon budgets approved by 195 countries.
Why are big investors still financing new oil fields?
This question is often asked — and the answer is painful: *because the financial accounting system has not yet incorporated the true cost of carbon*. In conventional business accounts, the costs of air pollution, public health issues caused by smog, or ecosystem damage from oil spills are *not recorded as liabilities*. They are considered 'externalities' — a burden borne by society, not the company. But when governments start implementing carbon taxes (such as Sweden's SEK1,300/ton CO₂), or when courts order companies to pay climate damages (like the Urgenda case in the Netherlands), these 'externalities' become real liabilities. Thus, the stock value of fossil fuel companies falls — not because they lack oil, but because *they have excess oil that cannot be sold*. Data from BloombergNEF (2023) shows: since 2015, global investment in new oil and gas exploration has increased by 17%, despite 73% of projects having negative ROI under oil prices of USD60/barrel — and becoming increasingly unviable under net-zero scenarios.
Who is most at risk — and why have universities and pension funds already taken action?
The risk is not evenly distributed. Pension funds such as APG (Netherlands) and USS (UK) have divested over USD47 billion from fossil fuel stocks since 2019 — not out of whim, but at the advice of financial risk firms like MSCI and S&P Global. Why? Because pension funds are responsible to millions of retirees — not to short-term shareholders. If a fossil fuel company loses 60% of its asset value within five years (as happened to Peabody Energy after its bankruptcy in 2016), that loss does not disappear — it is transferred to retirees waiting for their pensions. Universities such as Oxford and Stanford have also stopped investing in fossil fuels not just for 'image', but because internal studies show that fossil-free portfolios have delivered *higher returns* over the last 10 years — with 22% lower volatility.
Are renewable energies really cheaper — or just propaganda?
This is a critical question — and the answer is based on data from Lazard (2024): the levelized cost of utility-scale solar power is now USD24–$96/MWh, while natural gas is USD39–$101/MWh, and coal is USD68–$166/MWh — *without considering carbon costs*. When a carbon tax is applied (USD50/ton CO₂), coal costs jump 35–40%. In Malaysia, Tenaga Nasional Berhad reported that the operating cost of photovoltaic solar plants is 41% lower than that of second-generation gas turbine plants — and construction time is 60% faster. More importantly: the cost of renewable energy is falling *exponentially*, while fossil fuel costs are rising *linearly* — due to scarcity, geopolitical pressures, and regulations. So, it is not a matter of 'believe or not'. It is a matter of unavoidable financial arithmetic.
If this bubble bursts, will the global economy collapse?
No — but it will experience a 're-allocation shock'. Collapse happens when risks are unrecognized. The bursting of the carbon bubble will cause structural adjustments: fossil fuel companies will transform into integrated energy companies (like TotalEnergies, which now has 35% of its portfolio in renewables), workers will be retrained through 'just transition' programs (Malaysia is testing this model in Sarawak), and central banks will introduce 'climate stress tests' for commercial banks. Bank Negara Malaysia has included climate risk in the guidelines for bank risk management since 2022. The risk is not with the economy — but with entities that refuse to acknowledge that *the true value of assets is determined not by what is owned, but by what can be used*.
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*References: [Carbon bubble — Wikipedia](https://en.wikipedia.org/wiki/Carbon_bubble)*
Why Could USD26 Trillion Fossil Assets 'Burst' in 5 Years?. There is a hidden bubble in the global market — not in tech stocks or real estate, but in oil, gas, and coal. It is not visible in financial reports, yet it threatens the world's largest institutional investments. If 80% of fossil fuel reserves cannot be exploited, who will bear the losses? And why have European banks already started 'blocking' funding flows to new oil fields?. What is the 'carbon bubble' — and why is it not a conspiracy theory?
The term 'carbon bubble' did not originate from climate activists or ideologically driven academics. It was first formally introduced by the Carbon Tracker Initiative in 2011 — a London-based financial think tank composed of former Goldman Sachs analysts, World Bank economists, and climate risk experts. The term refers to a systemic mismatch between the stock market value of fossil fuel companies and the physical and regulatory realities of climate change. In short: the market still values companies like ExxonMobil, Shell, or Petronas as if all their oil and gas reserves will be fully sold — even though, according to the IPCC report and the Paris Agreement, only around 20% of global fossil fuel reserves can be burned if the world wants to keep warming below 1.5°C. The rest — approximately USD26 trillion in assets Bank of England, 2022 — are 'stranded assets': assets that physically exist, but economically cannot be used. This is not speculation. It is an calculation based on scientifically verified carbon budgets approved by 195 countries.
Why are big investors still financing new oil fields?
This question is often asked — and the answer is painful: because the financial accounting system has not yet incorporated the true cost of carbon . In conventional business accounts, the costs of air pollution, public health issues caused by smog, or ecosystem damage from oil spills are not recorded as liabilities . They are considered 'externalities' — a burden borne by society, not the company. But when governments start implementing carbon taxes such as Sweden's SEK1,300/ton CO₂ , or when courts order companies to pay climate damages like the Urgenda case in the Netherlands , these 'externalities' become real liabilities. Thus, the stock value of fossil fuel companies falls — not because they lack oil, but because they have excess oil that cannot be sold . Data from BloombergNEF 2023 shows: since 2015, global investment in new oil and gas exploration has increased by 17%, despite 73% of projects having negative ROI under oil prices of USD60/barrel — and becoming increasingly unviable under net-zero scenarios.
Who is most at risk — and why have universities and pension funds already taken action?
The risk is not evenly distributed. Pension funds such as APG Netherlands and USS UK have divested over USD47 billion from fossil fuel stocks since 2019 — not out of whim, but at the advice of financial risk firms like MSCI and S&P Global. Why? Because pension funds are responsible to millions of retirees — not to short-term shareholders. If a fossil fuel company loses 60% of its asset value within five years as happened to Peabody Energy after its bankruptcy in 2016 , that loss does not disappear — it is transferred to retirees waiting for their pensions. Universities such as Oxford and Stanford have also stopped investing in fossil fuels not just for 'image', but because internal studies show that fossil-free portfolios have delivered higher returns over the last 10 years — with 22% lower volatility.
Are renewable energies really cheaper — or just propaganda?
This is a critical question — and the answer is based on data from Lazard 2024 : the levelized cost of utility-scale solar power is now USD24–$96/MWh , while natural gas is USD39–$101/MWh , and coal is USD68–$166/MWh — without considering carbon costs . When a carbon tax is applied USD50/ton CO₂ , coal costs jump 35–40%. In Malaysia, Tenaga Nasional Berhad reported that the operating cost of photovoltaic solar plants is 41% lower than that of second-generation gas turbine plants — and construction time is 60% faster. More importantly: the cost of renewable energy is falling exponentially , while fossil fuel costs are rising linearly — due to scarcity, geopolitical pressures, and regulations. So, it is not a matter of 'believe or not'. It is a matter of unavoidable financial arithmetic.
If this bubble bursts, will the global economy collapse?
No — but it will experience a 're-allocation shock'. Collapse happens when risks are unrecognized. The bursting of the carbon bubble will cause structural adjustments: fossil fuel companies will transform into integrated energy companies like TotalEnergies, which now has 35% of its portfolio in renewables , workers will be retrained through 'just transition' programs Malaysia is testing this model in Sarawak , and central banks will introduce 'climate stress tests' for commercial banks. Bank Negara Malaysia has included climate risk in the guidelines for bank risk management since 2022. The risk is not with the economy — but with entities that refuse to acknowledge that the true value of assets is determined not by what is owned, but by what can be used .
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References: Carbon bubble — Wikipedia https://en.wikipedia.org/wiki/Carbon bubble
