UP TO 80% of declared global coal, oil and gas reserves, worth an estimated $22-trillion, would have to remain in the ground if the damaging effects of global warming were to be staved off, research warns.

This is revealed in the Carbon Tracker Initiative, a project of Investor Watch, a nonprofit company that aims to align capital markets with efforts to tackle climate change.

For SA, which has 3,7% of the world's coal reserves and interest from several multinational companies in probing the Karoo's untapped shale gas resource - estimated to be the world's fifth-largest - taking the United Nations' 2° C target seriously will mean a revamp of SA's chosen economic trajectory. The 2° C target is the limiting of emissions of gases linked to human-induced climate change, so that the world's average temperature increase remains at a maximum of 2° C above the average pre-industrial global temperature.

The National Planning Commission - the unit in the Presidency responsible for plotting SA's future - has warned that SA needs to move away from reliance on its mining sector for growth, but also says SA must position itself to benefit from what some believe is a gathering commodities boom. It has advised SA to at least determine the size of its shale-gas resource.

Even ignoring the 2° C threshold, climatologist Simon Gear says the world's easily reached oil, gas and coal have already been exploited, and BP predicts a 2056 peak for oil production and a 2068 production peak for natural gas. Other predictions do not foresee phosphorus production outlasting 100 years, or coal 188 years.

Carbon Tracker's report, Unburnable Carbon - Are the world's financial markets carrying a carbon bubble?, warns that to reduce to 20% the chance of exceeding the 2° C target, the world has to limit greenhouse gas emissions to the equivalent of 886 gigaton s (Gt) of carbon dioxide. Calculations of global emissions published in the scientific peer review journal Nature indicate the world had already emitted the equivalent of 321Gt of carbon dioxide in the first decade of this century.

This leaves a "budget" of about 565Gt. In contrast, the total carbon dioxide-equivalent potential of the earth's proven reserves comes to 2795Gt, 65% of this from coal, 22% from oil and 13% from gas, according to the report.

Carbon Tracker's position is supported by Bill McKibben, a professor at the US's Middlebury College and founder of climate campaign 350.org. He says : "In ecological terms it would be extremely prudent to write off $20-trillion worth of those reserves. In economic terms, of course, it would be a disaster, first and foremost for shareholders and executives of companies ."

Doing this would put investment portfolios - especially those with a long-term view - at risk of losing value in a "carbon bubble" that would make the subprime crisis look small, says report author James Leaton. "Given that only one-fifth of the total reserves can be used (if the world's average temperature increase) is to stay below 2° C, if this is applied uniformly, then only 149 of the 745Gt (of carbon dioxide equivalent gases) listed can be used unmitigated. This is where the carbon-asset bubble is located. If applied to the world's stock markets, this could result in a repricing of assets on a scale that would dwarf past profit warnings and revaluation of reserves," he says.

Shell SA, Total SA, Anglo American and Sasol either said there was not enough time to comment on the report, or ignored requests for comment.

Mr Leaton says oil, gas and coal companies are in a tight spot because their share price is tied to their known reserves. Analysis by McKinsey and the Carbon Trust, a UK-based nonprofit firm set up to assist business and public sectors cut emissions, says a company's reserves contribute about 50% of the financial value attributed to it by investors.

Sustainable investment advisor Graham Sinclair and KPMG resource economist Rohitesh Dhawan believe research such as the Carbon Bubble report is important because it informs debate, increasing knowledge of the full price of the commodities. "In the long run, it is our hope and expectation that policy makers will align the requirements of science, in the form of a carbon budget, with policies designed to promote action that contains emissions to required levels."

SA has committed to conditionally reduce its greenhouse gas emissions to 34% below "business as usual" by 2020 - a target that falls within that required by science. SA is to implement a carbon tax in the 2013-14 tax year, and Deloitte sustainability and climate-change director Duane Newman says South Africans already pay about R10bn a year in " carbon taxes" such as levies on vehicle emissions, electricity and fuel.

World Wide Fund for Nature SA climate change programme manager Richard Worthington says SA's Integrated Resource Plan to 2030 shows investment in renewable energy sources is "still a fraction" of what investors have been putting into fossil fuels in SA. "Maybe you just can't believe SA can get 100% of its energy from renewables, but what is realistic is a product of people's attitudes and beliefs and one way to get people to review their beliefs is to ask, 'Would you like to have your assets stranded?'."

blaines@bdfm.co.za