Economist Nicholas Stern warns energy reserves overvalued by markets LONDON, April 20 (UPI) -- A British economist warns of a so-called carbon bubble, caused by investors betting countries will not meet international targets for cutting emissions. Nicholas Stern said investments based on the assumption that coal and oil will remain as major sources of power could lead to another financial crisis, The Guardian reported Saturday. Stern, who teaches at the London School of Economics, also sits in the House of Lords as Baron Stern of Brentford. A report released Friday by Stern and the think tank Carbon Tracker said about two-thirds of the known reserves of fossil fuels will not be used if emissions targets are met. The targets were negotiated to try to overcome global warming. Stern said the 200 biggest energy companies spent a collective $674 billion in 2012 searching for new reserves that could remain underground. He described the risk that overvalued stocks in markets around the world will collapse as "very big indeed" and said regulators are doing little to prevent a burst carbon bubble. "The financial crisis has shown what happens when risks accumulate unnoticed," Stern said. Paul Spedding, an oil and gas analyst at HSBC, said investors appear to be assuming they will get an early warning of a shift away from fossil fuels, but he warned changes are often sudden. "The scale of 'listed' unburnable carbon revealed in this report is astonishing," he said. This report makes it clear that 'business as usual' is not a viable option for the fossil fuel industry in the long term. Stern and James Leaton of Carbon Tracker said the Chinese government has said its coal use will peak in the next five years, suggesting Australia and the United States are overly optimistic about long-term sales of coal to China. "I don't know why the market does not believe China," Leaton said. When it says it is going to do something, it usually does.