Carbon Tracker chair Leggett warns of financial system collapse over fossil fuel dependence

Leading figure outlines four main risks in new book

Jeremy Leggett, the chairman of the Carbon Tracker Initiative, the respected not-for-profit group which works to improve the transparency of the carbon embedded in equity markets, has issued a stark warning that the global financial system faces collapse due to its dependence on fossil fuels.

Carbon Tracker’s work on Unburnable Carbon has done much to put the ‘stranded assets’ issue onto global investors’ agenda. Just last month it was a coordinator, with US-based Ceres, of an investor campaign writing to 40 global oil, gas and coal companies asking them to review their exposure to carbon asset risk.

Now Leggett, a trained geologist who also chairs solar company Solarcentury and the African solar lighting charity Solar Aid, has outlined his fears in an article in the New Scientist magazine, warning that “system collapse is probably inevitable” within a few years.

Leggett argues that complacency at the top levels of government and business mean that we now face four great risks: the first two being climate change and a carbon bubble in the capital markets. The third risk identified is the boom in shale gas production: “That, too, may prove to be a bubble, maybe even a Ponzi scheme,” Leggett writes. The fourth risk concerns assumptions about oil depletion.He writes: “Most of us believe the industry mantra that there will be adequate flows of just-about-affordable oil for decades to come. I am in a minority who don’t. It is because of the sheer prevalence of risk blindness, overlain with the pervasiveness of oil dependency in modern economies, that I conclude system collapse is probably inevitable within a few years.”
He argues clean energy needs to be nurtured and accelerated “as though mobilising for war.” He pointed to experience in Germany and elsewhere that is starting to back the view that modern economies can be powered on a mix of renewables.
Leggett welcomes the latest report from the Intergovernmental Panel on Climate Change but says: “If we fail to heed the report and all its implications, the next great crisis of capitalism will force us to act. It won’t be possible to ignore lights that go out and tankers that fail to arrive.”
Leggett was the co-founder of clean energy private equity firm New Energies Invest SA, which is now in liquidation. His ideas are expanded on in his new book, which – echoing the title of Adam Smith’s The Wealth of Nations – is called The Energy of Nations: Risk blindness and the road to renaissance.