Business and Climate Change: Scenario planning at Shell and its analysis of the carbon bubble - Angus Gillespie (4.11.13)
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Angus Gillespie, VP CO2 Shell, shows how Shell has been developing scenarios to explore the future since the early 1970s and using them to allow leaders make better business decisions. Shell Scenarios ...
Angus Gillespie, VP CO2 Shell, shows how Shell has been developing scenarios to explore the future since the early 1970s and using them to allow leaders make better business decisions. Shell Scenarios ask “what if?” questions to explore alternative views of the future and create plausible stories around them. They consider long-term trends in economics, energy supply and demand, geopolitical shifts and social change, as well as the motivating factors that drive change. In doing so, they help build visions of the future. Over time, the Shell Scenarios have gained a global following among governments, academia and other businesses. They have helped deepen understanding of how the world might appear decades ahead.
The new “carbon bubble” phenomenon describes a hypothetical economic bubble that could affect the valuation of fossil fuels based assets. The current price of fossil fuels companies shares is calculated under the assumption that all fossil fuel reserves will be consumed. However, a report published earlier this year by Lord Stern and the think tank Carbon Tracker calculates that at least two-thirds of oil, coal and gas reserves will have to remain underground if the world is to meet existing internationally agreed targets to avoid the threshold for "dangerous" climate change, thus leading to a huge over valuation of these reserves. "The financial crisis has shown what happens when risks accumulate unnoticed," said Lord Stern, a professor at the London School of Economics. He said the risk was "very big indeed" and that almost all investors and regulators were failing to address it.
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