Companies are sitting on Australian coal resources likely to generate an extra 150 billion tonnes of greenhouse gases, setting a potential collision course with international efforts to curb global warming that would strand investments.
A new reportclaims investments in new Australian coal, oil, and gas projects are being made with no regard for the risk that they will later be devalued as the world moves to cut emissions.
It says these reserves will largely have to be left unburnt if global warming is to be kept at safe levels.
Climate Institute chief executive John Connor said investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming.
"Investors, governments and even some coal companies, say they take climate change seriously, but this report shows they do not or are taking risky gambles," he said.
The report studies Australian coal reserves and resources that companies have on their books and calculates the potential emissions that would emerge if developed.
It finds Australian companies hold coal resources that would generate 115 billion tonnes of greenhouse gases. When Australian coal resources owned by foreign listed companies are added, it brings the total emissions potential to about 300 billion tonnes.
But the report authors say international assessment standards recognise that only about 50 per cent of these resources will be developed.
If developed, the resources would double Australia's proven listed coal reserves, and the associated 150 billion tonnes of emissions would equate to 300 times Australia total annual emissions in 2012.
The extra greenhouse gases from Australian coal alone would account for 75 per cent of the total amount of global emissions that can come from burning coal to give the world a strong chance of keeping global warming to two degrees – the international target agreed by countries through the United Nations.
The report says this would be a vast proportion of the global carbon budget to be given to a single country, "especially true given that Australia produces only 11 per cent of the total global coal production".
The report warns Australia is also exposed to efforts by its major coal customers to improve their energy efficiency and reduce their emissions. In particular the researchers point to China's target to cap coal use at four billion tonnes by 2015.
"investors need to challenge the assumption that coal demand will continue to rise in China and elsewhere, otherwise billions of dollars of taxpayer, superannuation and shareholder funds will be wasted in assets linked to unburnable carbon," Carbon Tracker's research director, James Leaton, said.
The report follows a global assessment by Carbon Tracker and the Grantham Institute finding hundreds of billions of dollars in fossil fuel projects would be stranded, triggering a potential economic crisis, if companies continue to invest in carbon-intensive projects while governments introduce stronger policies to limit global warming.