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Capital stranding cascades: The impact of decarbonisation on productive asset utilisation

Antoine Godin (), Louison Cahen-Fourot, Emanuele Campiglio (), Eric Kemp-Benedict () and Stefan Trsek

Working Paper from Agence française de développement

Abstract: The aim of this article is to assess the exposure of economic systems to the risk of physical capital stranding following a reduction of fossil fuel production and use. We calculate crosssectoral and cross-country ‘marginal stranding multipliers’ for 43 regions, and study how supply-side capital stranding might propagate via international production networks. We show how the fossil industry has the potential of creating significant stranding cascades affecting downstream sectors and the economic system as a whole. We then focus on crosscountry stranding impacts and rank countries according to their external stranding potential and to their exposure to external stranding risk. Finally, we analyse more in depth the origins and transmission channels of the stranding links affecting the most exposed countries (US, China and Germany). Our results confirm the relevance of including multi-regional production networks and physical capital stranding into the ongoing effort to assess the macro-financial implications of a low-carbon transition.

JEL-codes: Q (search for similar items in EconPapers)
Pages: 36
Date: 2021-03-03
New Economics Papers: this item is included in nep-ene and nep-isf
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Published in Research Papers

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https://www.afd.fr/sites/afd/files/2021-03-11-39-5 ... nding%20cascades.pdf (application/pdf)

Related works:
Journal Article: Capital stranding cascades: The impact of decarbonisation on productive asset utilisation (2021) Downloads
Working Paper: Capital stranding cascades: The impact of decarbonisation on productive asset utilisation (2021) Downloads
Working Paper: Capital stranding cascades: The impact of decarbonisation on productive asset utilisation (2019) Downloads
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