Stranded Assets in the Transition to a Carbon-Free Economy

Posted: 26 Oct 2020

See all articles by Rick van der Ploeg

Rick van der Ploeg

University of Oxford

Armon Rezai

Vienna University of Economics and Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

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.

Suggested Citation

van der Ploeg, Frederick and Rezai, Armon, Stranded Assets in the Transition to a Carbon-Free Economy (October 2020). Annual Review of Resource Economics, Vol. 12, Issue 1, pp. 281-298, 2020, Available at SSRN: https://ssrn.com/abstract=3716735 or http://dx.doi.org/10.1146/annurev-resource-110519-040938

Frederick Van der Ploeg (Contact Author)

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Armon Rezai

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
60
PlumX Metrics