STRANDED ASSETS IN THE TRANSITION TO A CARBON-FREE ECONOMY

Frederick (Rick) van der Ploeg and Armon Rezai

No 894, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Assets in the fossil fuel industries are at risk of losing market value due to anticipated breakthroughs in renewable technology and governments stepping up climate policies in the light of the Paris commitments to limit global warming to 1.5 or 2 degrees Celsius. Stranded assets arise due to uncertainty about the future timing of these two types of events and substantial intertemporal and intersectoral investment adjustment costs. Stranding of assets mostly affects the 20 biggest oil, gas and coal companies who have been responsible for at least a third of global warming since 1965, but also carbon-intensive industries such as steel, aluminium, cement, plastics and greenhouse horticulture. A disorderly transition to the carbon-free economy will lead to stranded assets and legal claims. Institutional investors should be aware of these financial risks. A broader definition of stranded assets also includes countries reliant on fossil fuel exports and workers with technology-specific skills.

Keywords: de-carbonisation; policy tipping; technology; stranded assets (search for similar items in EconPapers)
JEL-codes: E62 F41 G11 O33 Q33 Q34 Q35 Q40 Q54 (search for similar items in EconPapers)
Date: 2019-12-19
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:15ff28df-a308-4aa5-a956-3b53bbae9539 (text/html)

Related works:
Journal Article: Stranded Assets in the Transition to a Carbon-Free Economy (2020)
Working Paper: Stranded Assets in the Transition to a Carbon-Free Economy (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:894

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen (facultyadmin@economics.ox.ac.uk this e-mail address is bad, please contact repec@repec.org).