Investing in extreme times Jan 3rd

Mario Anzuoni/Reuters
The energy sector, including giants like BP, Shell and ExxonMobil, is overvalued to the tune of trillions of dollars and the entire industry—if not the global economy itself—could be thrown into crisis with the stroke of a pen. At least that’s the prediction of those who ascribe to the theory of a global carbon bubble. The thinking is as follows: the world is hurtling toward a climate change crisis and any serious global effort to prevent it will render a good chunk of recoverable oil reserves essentially unburnable.
While it sounds like an idea dreamt up by student activists over a few beers—and, indeed, several oil majors dismissed it as such—the warnings are being taken seriously by some high-profile people. Mark Carney, Canada’s former central banker and the current governor of the Bank of England, raised the issue at a World Bank conference earlier this year (he prefers the term “stranded assets”) and has since tasked the U.K.’s central bank to study the issue…