One chart that shows big business is 'in denial' about demand for fossil fuels

Investors are stuck in a ‘business as usual’ approach to fossil fuels that could mean they face problems when demand falls

Tuvalu is at risk from climate change (Stefan Lins)

Businesses are "in denial" about the demand for fossil fuels in the run up to the Paris climate summit.

Carbon Tracker, an environmental think tank of financial specialists, has noted that many companies use figures from the International Energy Agency (IEA) to justify their figures for fossil fuel demand to 2040. Carbon Tracker said this is particularly the case in the coal sector where few companies have their own scenarios to refer to, so tend to selectively quote the IEA’s numbers out of context.

Luke Sussams, senior researcher at Carbon Tracker said fossil fuel companies are failing to acknowledge the constraints on demand and haven’t got that close to recognising the explosion of renewables. "That’s typical of an outlook within the industry," Mr Sussans told the Independent.

The climate change agreement on the table in Paris should limit demand for fossil fuels in a way that is not accounted for in these estimates. It includes a commitment by governments to hold warming to no more than 2C, or potentially 1.5C, above pre-industrial levels.

Environmentally, this is crucial. Scientists believe that global warming above 2C is likely to lead to disasters like extreme weather, droughts, floods and sea level rises.

Mark Campanale, Founder of the Carbon Tracker Initiative, said that investors stuck in a ‘business as usual’ approach to fossil fuels that could mean they face problems when demand falls. “The commitments in Paris require emissions to drop by 30-40%. These goals negate fossil fuel industry plans to expand the sale of their products. Even Goldman Sachs is telling their clients that the chances of a recovery in the worst polluting sector, the coal industry, is looking bleak,” Mr Campanale said.

The IEA numbers also underestimate the ability of solar and wind power to fill the demand for energy as the charts below show. The blue lines show the actual capacity of wind and solar power with IEA estimates far below.

How much energy is available from solar (L) and wind (R) sources

(Carbon Tracker)

The Paris climate summit, which kicks off on November 30, has been called “a one-way ticket to a low-carbon economy”.

“No amount of lobbying at this point is going to change the direction,” Christiana Figueres, the UN’s top climate official, told a Carbon Tracker forum in London.

Big businesses are only just waking up to the financial impact that the new agreement would have. “Climate change will threaten financial resilience and longer-term prosperity," Mark Carney, the Governor of the Bank of England, warned businesses in September.

"While there is still time to act, the window of opportunity is finite and shrinking," he said.