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

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

No 37, Ecological Economic Papers from WU Vienna University of Economics and Business

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 cross-sectoral 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 cross-country stranding impacts and rank countries according to their external stranding potential and to their exposure to external strandingrisk. 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.

Keywords: low-carbon transition; asset stranding; production networks; capital stocks; fossilfuels; supply-side policies (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-isf
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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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