New Study Shows Climate Risks of Industry’s Fossil Fuel Reserves and Further Exploration

Analysis Focuses on State- And Investor-Owned Entities

Published Nov 25, 2015

Washington (November 27, 2015)—A study published Wednesday by Richard Heede and Naomi Oreskes in Global Environmental Change sheds new light on the potential global warming emissions from the carbon reserves held by the world’s largest producers of oil, natural gas and coal, raising new doubts about future development of new fossil fuel resources. Among the study’s findings:

  • Burning the reserves of the world’s largest fossil fuel producers will result in emissions of 440 gigatons of carbon—far in excess of the 275 gigatons of carbon scientists say can be emitted this century if global mean temperature increases are to stay at or below 2 degrees Celsius;
  • The future emissions from the proven reserves of the largest 28 state-owned entities, including the National Iranian Oil Company, Saudi Aramco and Russia's Gazprom, collectively make up more than three quarters (76 percent) of the world's remaining carbon budget;
  • The future emissions from the proven reserves of the largest 42 investor-owned companies collectively make up 16 percent of the world’s remaining carbon budget.  

The study, funded in part by the Union of Concerned Scientists (UCS), found that “profound risk” to the climate exists from the prospect of state-own entities extracting even their proven reserves.

“This study shows just how important it is that the world reaches a strong international climate agreement in Paris next month,” said Alden Meyer, the director of strategy and policy at UCS who has been involved in the climate negotiations for 25 years. “The fact is, Russia, Iran, Saudi Arabia and other oil producing counties are continuing to ramp up production, despite the threat climate change poses to communities around the world.”

The study shows the reserves of most of the 42 investor-owned companies will be exhausted in 15 years or less. But oil and gas companies are investing hundreds of billions of dollars to explore for and develop new reserves to extend production in the decades to come.

“The threat of exceeding the 2 degree Celsius target comes primarily from the investor-owned companies tapping new reserves, less so from their relatively small existing reserves,” said Heede, the principal of Climate Mitigation Services.

The study’s findings can help inform shareholder action, according to UCS.

“Investors should expect fossil fuel companies to put forward business plans for a 2 degree world,” said Peter Frumhoff, chief scientist at UCS. “This study makes clear that this should include the rapid phase out of exploration of new resources.”

The reserves of the 70 largest state- and investor- owned producers together comprise nearly all, or 92 percent, of the carbon budget. Future emissions associated with government-run coal industries—including those in China, Poland, Ukraine and North Korea—and smaller companies will surpass the budget’s remaining 8 percent, causing global temperatures to rise beyond the threshold set by nations party to the international climate negotiations.  

“The bottom line is that if we’re to have any hope of avoiding a 2 degree temperature increase, the largest state-owned companies cannot fully tap all of their proven reserves and the big investor-owned companies need to decrease rapidly, and ultimately eliminate, their capital expenditures for exploration and development of new reserves,” said Oreskes, a Harvard history of science professor and former exploration geologist.

Oreskes pointed out that she and Heede analyzed a carbon budget associated with avoiding a 2 degree temperature increase because it had been set as a target by world leaders. But she cautioned that some scientists now believe the threshold may be too high and that a 1.5 degree Celsius limit would be more protective, especially of island nations at risk of being swamped by global warming-driven sea level rise.