Despite this whole rafts of the stock market are valued not on what extractive industries companies actually do but on what their reserves are.
It’s not in fact true that they are valued on their reserves. Just isn’t.
But there’s a more important point which such a campaigner as the Spud should grasp. The central problem as revealed by Nick Stern is the discount rate. At what interest rate do we discount future events? As Nickyboy pointed out, if we use market interest rates than things which happen decades out have near to no net present value. The damages from a 70 metre sea level rise as Antarctica melts in 2,500 AD have a value of about tuppence today. and that really cannot be quite right thus we should use a lower discount rate to value far into the future events.
But note that when we do value reserves of extraction companies we do not use the lower and Stern approved social discount rate. We use the market interest rate. No, that’s not the yield on gilts either. It’s the stock market rate – something much more akin to 5 or 7%. And if we discount, say, oil reserves at 7% out to 50 years we get a net present value of spit.
That is, anyone who actually understood the climate change argument could not possibly argue that fossil fuel companies face an imminent collapse in valuation because future reserves will be stranded.
But Spud does so argue.