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Royal Dutch Shell, Exxon Mobil and Glencore: Energy companies risk wasting trillions on uneconomic projects

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By Jessica Morris: 25 November 2015

Energy companies risk wasting $2.2 trillion (£1.46 trillion) on uneconomic projects over the next 10 years, according to a new report.

Think tank the Carbon Tracker Initiative’s (CTI) report how fossil fuel firms risk destroying investor returns says energy companies’ focus on fossil fuels at the expense of emerging clean technologies could put them out of kilter with environmental regulation, which will eventually dampen demand.

It comes ahead of next week’s Paris Climate Change Conference (COP21) which is expected to result in, or at least pave the way for, more climate change legislation.

Oil majors Royal Dutch Shell, Pemex, Exxon Mobil, alongside coal miners Peabody, Coal India, and Glencore are the companies posing the biggest risk in a demand misread to the climate and shareholders alike.

In terms of countries, the US has the greatest financial exposure with $412bn (£273bn) of unneeded fossil fuel projects to 2025 at risk of becoming stranded assets. This is followed by Canada, China, Russia and Australia. 

“Too few energy companies recognise that they will need to reduce supply of their carbon-intensive products to avoid pushing us beyond the internationally recognised carbon budget,” James Leaton, head of research at CTI and co-author of the report, said. 

“Clean technology and climate policy are already reducing fossil fuel demand – misreading these trends will destroy shareholder value. Companies need to apply 2˚C stress tests to their business models now.”

Mark Fulton, advisor to CTI and former head of research at Deutsche Bank climate change advisors, and co-author of the report, added: “Big energy companies are ignoring rapid advances in clean technologies which threaten to undermine their business models, such as renewables, battery storage and electric cars.”

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