Former US vice president Al Gore says the coming clean energy revolution means there is a $29 trillion bubble in the global economy that will need to pop.
Gore is best known these days as a climate warrior but he is also the chairman of Generation Investment Management LLP. He says those caught on the wrong side of the coming transition to sustainable energy stand to lose billions.
While traditional energy prices including oil have soared in recent months as the developed world emerges from lockdowns, Gore is warning of a "subprime carbon bubble".
Speaking to Bloomberg on the sidelines of the COP26 climate summit, he said investors need to tread lightly, likening the current situation to the subprime mortgage bubble that triggered the GFC.
"We now have a subprime carbon bubble of US$22 trillion ($29 trillion), based on an absurd assumption that all of those carbon fuels are going to be burned.
"They’re not going to be, especially because the new renewable sources of electricity are much cheaper now," he said.
Gore has been banging the same drum for more than a decade, but believes the decarbonisation of the global economy is now finally at the point of no return.
"I think we’re in the early stages of a sustainability revolution that’s the biggest opportunity in history,” Gore said. “And those who don’t recognise that and adapt to it are in commercial risk. They’re going to be left behind."
The former vice president, who narrowly lost the presidential race to George W. Bush in 2000, said once the full risks of the climate crisis are "internalised" – including the possibility of globally coordinated price on carbon – then "it’s going to affect the value of all these assets."
For the moment though, oil, gas and coal companies in Australia are thriving with the share prices of gas giant Santos (STO) up nearly 40 per cent on the year, Woodside Petroleum (WPL) up nearly 25 per cent in 12 months, and Whitehaven Coal (WHC) up a whopping 146 per cent year to date.
As Aaron Patrick, senior correspondent at the Australian Financial Review, noted this week: "For the moment the trade of the decade – the shift to renewable energy production – is being won by fossil fuels."