Stranded Assets in the Transition to a Carbon-Free Economy
By F. van der ploeg, Armon Rezai. Annual Review of Resource Economics, 2020
203 citations recorded by the source corpus.
Assets in the fossil fuel industries are at risk of losing market value due to unanticipated breakthroughs in renewable technology and governments stepping up climate policies in light of the Paris commitments to limit global warming to 1.5 or 2°C. 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 one-third of global warming since 1965, but it also affects carbon-intensive industries such as steel, aluminum, 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.
Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/122ec99a0be6f887adc6ecf0e0b3cbaed34ff3e0
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Citations in the corpus
- Low‐carbon transition risks for finance (2020, background): “For instance, a widespread preoccupation concerns the financial repercussions of asset stranding, that is, the unexpected devaluation or write-off of assets from the balance sheets of economic agents (Caldecott, 2018; van der Ploeg & Rezai, 2020a).”