FINANCIAL RISKS OF FOSSIL FUELS AND THE CLEAN DEVELOPMENT MECHANISMS: PERSPECTIVE FROM EAST AFRICA

Abstract

Continued use and investment into fossil fuels pose significant global financial risks to fossil fuel companies and the global economy. With commitment by the international community to the unequivocal target of stopping the earth’s atmosphere from warming by more than 2°C, these investments in costly ventures will clash with international climate goals and may never be viable. As the world increasingly limits carbon emissions and moves to alternative energy sources, investments in fossil fuels may take a huge hit. Despite the growth in the fossil financial market in recent decades, energy undertakings could lose value on stock exchanges, when investors realise that a large part of fossil fuel reserves cannot be burned, leading to a carbon bubble. A divestment movement in fossil fuels, concerned with effects of fossils in the global climate system, is taking shape to discourage investments in fossil fuel companies. East African countries of Tanzania, Kenya and Uganda are amenable to these risks, having discovered substantial and commercially viable quantities of oil, gas and coal.