Financial markets are betting on failure of the Paris Agreement

<title>Abstract</title> <p>Proven oil reserves underpin national wealth and fiscal stability in many oil-producing nations, but their value reflects future prices that may be economically incompatible with international climate goals. Prior studies have identified which reserves are unburnable under climate targets, but the divergence between prices of fossil fuels in climate-scenarios and futures markets has not been quantified, despite real implications on the value of countries’ and companies’ resources. Here, we compare oil prices embedded in Brent futures with those in a range of energy-emissions scenarios, using extraction costs to map the implied disparities in value of countries’ proven oil reserves. By 2034, Brent futures imply $46.2 trillion more reserve value than strong mitigation scenarios (i.e., Net-zero 2050). This difference is highly concentrated: six countries account for 76% of the total, led by Saudi Arabia, Venezuela, and Iran. These differences accrue overwhelmingly to state-owned national oil companies—led by the National Iranian Oil Company and Saudi Aramco—rather than publicly traded majors. Yet mitigation would not destroy reserve value uniformly: falling prices would drive high-cost producers out of the market, allowing low-cost Gulf states to capture over 60% of the value of reserves that remain economically recoverable. If climate mitigation succeeds, economic diversification in oil-dependent nations will be critical to avoid cascading sovereign debt crises.</p>