Al Gore: “Carbon Bubble” Is Going to Burst – Avoid Oil Stocks

Al Gore: “Carbon Bubble” Is Going to Burst – Avoid Oil Stocks·Daily Ticker

It’s no surprise that former Vice President Al Gore isn’t a fan of big oil. Gore received the 2007 Nobel Peace Prize for "informing the world of the dangers posed by climate change" and currently is chairman of The Climate Reality Project, a non-profit devoted to solving the climate crisis.

But Gore is also an investor – he’s co-founder and chairman of Generation Investment Management and a senior partner at Kleiner Perkins – and believes fossil fuels are almost as bad for your portfolio as they are for the planet.

“We have a carbon bubble,” Gore tells me in the accompanying video. “Bubbles by definition involve a lot of asset owners and investors who don’t see what in retrospect becomes blindingly obvious. And this carbon bubble is going to burst.”

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Specifically, Gore cites the estimated $7 trillion in carbon assets on the books of multinational energy companies. “The valuation of those companies and their assets is now based on the assumption that all of those carbon assets will be sold and burned,” he says. “They are not going to be burned. They cannot be burned and will not be burned. No more than one-third can ever possibly be burned without destroying the future.”

By 'carbon assets', Gore refers to the oil and gas reserves controlled by publicly traded energy companies; all these fossil fuels have carbon as their primary element. He didn't specify, but it appears Gore got the $7 trillion valuation on those assets from this report from Carbon Tracker, a non-profit focused on climate change policy.

According to Gore, these carbon assets are today’s equivalent of subprime mortgages, featuring “absurd valuations” based on a “self-serving allusion” that the carbon-based energy sector is sustainable in the long-term.

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“People can make short-term profits playing the psychology of the markets,” he continues. “But if you’re a long-term investor and you do not take into account the stranded-assets potential for carbon-based equities and debt instruments, in my view you’re making a mistake.”

Think what you want about Gore (or global warming) but he’s been incredibly successful in business since leaving public office: Gore’s net worth tops $200 million, according to Bloomberg, nearly as much as 2012 GOP Presidential candidate Mitt Romney.

Go to Yahoo Screen to see The Daily Ticker's full interview with Al Gore.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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