Potential pension fund losses should not deter high-income countries from bold climate action

Gregor Semieniuk, Lucas Chancel (), Eulalie Saïsset (), Philip Holden, Jean-Francois Mercure and Neil Edwards
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Lucas Chancel: Institut d'Études Politiques [IEP] - Paris, WIL - World Inequality Lab, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Eulalie Saïsset: WIL - World Inequality Lab
Philip Holden: OU - The Open University [Milton Keynes]
Jean-Francois Mercure: World Bank - World Bank

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Abstract: Shutting down fossil-fuel production sites before available reserves are depleted or the useful life of the capital equipment exhausted, is a necessary consequence of ambitious climate policy. Yet, if unanticipated by the investors in these assets, it also leads to a loss on their investment, so-called stranded assets. Governments in rich, Western countries may water down their climate policies for fear of the social repercussions of such asset stranding as these policies hurt oil and gas companies. In particular, pension plans invested in capital markets that are already underfunded could be at risk of falling even shorter of meeting their present and future pay-out obligations. The current push to expand fossil-fuel investments in both Europe and the United States as a result of the reduced gas supplies from Russia, following Russia's invasion of Ukraine, only serves to underscore the worry of diluted climate ambition. As the valuations of oil and gas companies soar, their importance for the health of pension savings only grows.

Keywords: stranded assets equity ownership wealth inequality energy transition climate policy; stranded assets; equity ownership; wealth inequality; energy transition; climate policy (search for similar items in EconPapers)
Date: 2023-06
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Working Paper: Potential pension fund losses should not deter high-income countries from bold climate action (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-04173189

DOI: 10.1016/j.joule.2023.05.023

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