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Physical Risks

The following are significant physical risks related to Carbon Asset Risk.

Sea Level Rise + Storm Surge

Hurricane Katrina and Superstorm Sandy provided clear indications of just how damaging climate change is and will be. From lost lives, to wrecked electric grids, and flooded refineries, the rising sea levels and storm surges pose significant threats to everyone, but the fossil fuel industry is especially vulnerable. For a more detailed view of these risks, read Physical Risks from Climate Change, Stormy Seas, Rising Risks: What Investors Should Know About Climate Change Impacts at Oil Refineries, and The Frozen Frontier: Is Shell Ready for the Risks of Arctic Drilling.

Deepwater + Ultradeepwater

The physical risks are often more pronounced in the context of deepwater and ultra-deepwater drilling, a growing percentage of new production around the globe. The most infamous accident associated with deepwater drilling was the BP Macondo incident, but numerous accidents and incidents have occurred as this type of drilling has been on the rise. Read more about the risks specific to deepwater drilling in Sustainable Extraction? An Analysis of SEC Disclosure by Major Oil & Gas Companies on Climate Risk and Deepwater Drilling Risk.

Water Scarcity and Wastewater Injection

Much of the growth in North American production has resulted from the practice of hydraulic fracturing, an extremely water intensive activity. As droughts and water quality issues become more prevalent in a changing climate, water stress is a key component of Carbon Asset Risk. For a more detailed analysis of the implications of water scarcity, review Hydraulic Fracturing & Water Stress: Water Demand by the Numbers. The injection of wastewater has also become an issue of increasing importance for the oil and gas industry as multiple links have been made between this practice and seismic activity. The Oklahoma Supreme Court recently allowed homeowners to sue for damages related to earthquakes caused by wastewater injection, and the Dutch government has dramatically reduced drilling activity in the Groningen field over concerns about the link to earthquakes.