Research from the University of Cambridge has found that the burst of the “carbon bubble” will lead to another drastic downturn of the global economy that will cost trillions of dollars.
In the case of such a downturn, the study predicts mass unemployment that would result in the populist leaders rising from widespread political unrest in countries that are heavily reliant on oil and gas.
Oil companies that hold significant reserves of fossil fuels could experience a sharp devaluation and therefore become “stranded assets” by 2035, according to the study.
Technological changes in the global power market means the prices of fossil fuels could collapse suddenly, which could wipe out between one and four trillion dollars from the global economy.
Cambridge’s Centre for Environment, Energy and Natural Resource Governance noted in its ‘Nature Climate Change’ that the financial crisis was caused by the loss of just $0.25 trillion.
Jean-François Mercure, lead author, said: “When people realise that perhaps their investments are not safe, and they decide to put their money elsewhere this can lead to crowd effects and [share prices] could change value very rapidly.”