A report by the Geneva-based Rousseau Institute, Friends of the Earth France, and Reclaim France says a rapid energy transition out of fossil fuels could rock the financial system, and goes on to call for a “carbon bad bank” to bail out the system.
A rapid depreciation of CO2 assets would resemble the depreciation of the subprime assets in 2008 and bankrupt European large banks, the report says.
The eleven largest banks in the European Union, including BNP Paribas SA, Deutsche Bank AG, and UniCredit SpA, have 532 billion euros ($648 billion) of investments and loans financing everything from extraction to transportation of fossil fuels, equivalent to 95% of their total common equity tier 1 capital (CET1), according to the report. A sudden drop in value of these “fossil-fuel assets” would deplete the banks’ capacity to absorb losses and might even leave them vulnerable to bankruptcy, the researchers said.
