The "carbon bubble" refers to a potential financial risk arising from the overvaluation of companies that are heavily dependent on fossil fuels. The term refers to the risk that the market value of these companies could collapse if political measures to combat climate change are tightened or technological advances accelerate the transition to renewable energies.

Background:

• Fossil fuels and reserves: Many companies, particularly in the oil, gas and coal industries, have large fossil fuel reserves that are factored into their market value. However, if these reserves cannot be exploited due to stricter climate protection measures, these assets would be "stranded" and their value would fall dramatically.
• Climate targets: In order to achieve global climate targets, in particular the 1.5°C or 2°C target of the Paris Agreement, CO₂ emissions must be greatly reduced. This means that a large proportion of known fossil fuel reserves must not be burnt in order to keep emissions within limits.
• Market overvaluation: The value of many companies in the energy sector is based on the assumption that they can fully utilise their fossil fuel reserves. However, if this assumption turns out to be wrong, this could lead to a sudden and drastic revaluation, which would burst a "bubble".

Possible consequences:

• Financial instability: a collapse in the valuations of these companies could have a significant impact on the financial market and investors who are heavily invested in fossil fuels.
• Sustainable investments: Increasing awareness of the carbon bubble is fuelling a trend towards sustainable investment and divestment from fossil fuels to minimise risk.

The carbon bubble emphasises the urgency of adapting economic strategies and investments to the reality of climate change and supporting the transition to a low-carbon economy.