Some 60% to 80% of fossil fuel reserves owned by listed firms could be classed as unburnable if politicians stick to CO2 emission limits, a report warns.
The research by the London School of Economics and NGO Carbon Tracker says firms spend billions of pounds of shareholders' money on exploration.
It says 200 listed firms spent £440bn in 2012 chasing more coal, oil and gas.
It says if this continues for a decade - and if CO2 limits are achieved - they would waste over £4tn.
The Unburnable carbon 2013: Wasted Capital and Stranded Assets report says the listed companies analysed own 762 billion tonnes of CO2 in the form of coal, oil and gas.
Many of the firms are listed in the City of London - the world's fossil fuel investment capital.
To stick to the current agreed global limit on emissions - which is sure to be breached - the firms would probably be able to emit no more than about 125-275 billion tonnes of CO2 - about a quarter of their assets.
The authors say that, even if the rules are relaxed to allow emissions to a level associated with a 3C temperature rise, there will still have to be limits on fossil fuel burning.
The carbon capture and storage technology can strip carbon from fossil fuel exhaust gases and store it in rocks, but it is unproven at scale, trials are years behind schedule and it may not work in some areas of the world.
The authors say the current fossil fuel business model assumes that there are no emissions limits.
This attitude is perhaps hardly surprising, given the mismatch between politicians' rhetoric on the need to cut emissions and the continued rise in atmospheric CO2.
Carbon Tracker has been campaigning for regulators to force firms to disclose the potential CO2 emissions embedded in their fossil fuel reserves, in order to inform potential investors.
It says there is a danger of a carbon "bubble."
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