Unburnable Carbon

The world's proved fossil fuel reserves contain roughly 2,900 billion tonnes of potential CO2 emissions. The remaining carbon budget for 1.5 degrees C is about 500 billion tonnes. Simple subtraction: more than 80% of known reserves cannot be burned if that target holds.

Unburnable carbon is the share of fossil fuel reserves that must stay in the ground to meet a given climate target. The concept, introduced by Carbon Tracker in 2011, reframes climate policy as a financial question: if most reserves cannot be combusted, companies carrying those reserves on their balance sheets are overvalued. The gap between book value and burnable value is stranded asset risk.

Size the mismatch. The 2 degrees C budget (higher probability) is roughly 1,150 Gt. Even under the more generous target, over 60% of reserves are unburnable.

Distribute the exposure. Coal is the most vulnerable: highest carbon intensity per unit of energy, lowest extraction cost advantage, most easily substituted by gas and renewables. Oil faces moderate exposure, concentrated in high-cost deposits (oil sands, deepwater). Gas is least exposed due to lower carbon intensity and its role as a transition fuel.

If markets believed 80% of reserves were truly unburnable, what would happen to fossil fuel company valuations?

Follow the money. Share prices would fall to reflect the reduced value of reserves. Lending to new exploration would tighten. Capital would redirect toward lower-carbon assets. The exposure lands on whoever holds the paper: shareholders, pension funds, and the sovereign wealth funds of petrostates. Norway's fund, built on oil revenue, has begun divesting from some fossil fuel holdings.

Whether and when this repricing occurs depends on the credibility of climate commitments, which is why unburnable carbon sits at the intersection of geology, finance, and politics.

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