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67 TDcroppedThis question is considered in a new Information Paper by IEAGHG, 2015-IP2. There have been several prompts for this. The Financial Times reported on the 30 November that the Bank of England is to examine formally for the first time the risks fossil fuel companies pose to financial stability in a future carbon-constrained world. In COP-20 in Lima, I witnessed protests against fossil fuel producers, some of whom were misusing the IPCC AR5 quote ‘no fossil power by 2100’ to argue that all fossil fuel reserves should be left in the ground (AR5 actually says no fossil power without CCS by 2100).

Several news media picked up the negative aspects of these stories relating to the finance industry’s re-assessment of the risks in fossil fuel reserves in the context of potential future climate agreements. But instead of a negative, this should be considered a positive development for CCS.

The International Energy Agency have been mentioning this concept for a couple of years. “Not only does CCS serve our climate objectives, but investing in development and deployment of CCS is an important risk management (“hedging”) response for companies and governments who derive significant income from fossil fuels. CCS therefore promises to preserve the economic value of fossil fuel reserves and the associated infrastructure in a world undertaking the strong actions necessary to mitigate climate change.“ (IEA CCS Technology Roadmap 2013 and IEA World Energy Outlook 2012).

IPCC AR5 also mentions that the availability of CCS would reduce the adverse effects of mitigation policies on the value of fossil fuel assets.

CCS is a critical stage. There are just enough large-scale demonstrations operating to substantiate the confidence that it works at large-scale, but not enough yet to put it on the path to meeting climate goals. Funding and economics are often quoted as the reasons for projects not proceeding. If the potential risks to financial stability are as great as some in that sector worry, perhaps the financial sector should be doing more to encourage demonstration and deployment of CCS, for example by direct investment. This could make a big difference to CCS demonstration projects and to future deployment. Such investment would then be helping to ensure the stability of their own sector, future-proofing it for a future carbon-constrained world, in addition to the climate and other environmental benefits that all would accrue.

So perhaps the CCS world needs to be engaging more with the financial world, for their mutual benefit?