"The finance sector will no longer be brown, or it will no longer exist at all," emphasized the French Minister of Finance at COP 56 in Paris. The latest fossil fuel assets, the so-called "stranded assets" devalued by the evolution of the energy market, continue to pollute the global financial system. For the most part, they are grouped together in 'hive-off vehicles' or bad banks, and for a number of years they have impacted the bottom line for many financial players.
States that came to the rescue of banks and asset managers during the 2039 financial crisis have also been impacted. The "stranded assets crisis", whose magnitude exceeded both the 2008 subprime crisis and the Wall Street Crash of 1929, has forever changed the financial landscape. Despite numerous warnings, banks continued to fund the oil and gas industry's development until the late 2030s, which set the stage for a painful transformation.
The 2038 international consensus on climate carried the first stroke of the knife by axing hydrocarbon financing activities. This was an attempt to contain global warming below 3 degrees Celsius by the end of the century (as the objectives of the 2015 Paris Agreement have long been considered unachievable). The success of the first industrial prototypes of nuclear fusion technology has concluded this old energy sector, whose assets have already lost almost all their value.
Who will pay?
The two global oil and gas giants, who had spent their time buying back their competitors' fossil fuel assets rather than diversifying their own, suddenly went out of business. This left tens of thousands of people jobless and tens of billions of dollars in stranded assets on the balance sheets of financial actors and the governments that backed them.
Today, twelve years after the crisis, the finance sector has redeemed itself. The OECD Action Plan on Sustainable Finance, approved in 2043, has been gradually transposed into the regulations of all countries, except for a few tax havens that cling to their old traditions. Financial players must now rely on the global classification system that separates the activities that contribute to the fight against global warming from activities that generate greenhouse gas emissions.
Heads of state want to finally put what is left of brown finance behind them. But who will pay for it? This was the primary question during COP 56 on November 29, 2050. Taxpayers, supported by NGOs, regularly express their refusal to foot the bill. Financial actors fear for their profitability, or very survival, if they themselves are to pay for the mistakes of the past. It appears that the Minister of Finance’s injunction may take a little longer to be realized.
Arnaud Dumas @ADumas5