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Stranded fossil-fuel assets translate to major losses for investors in advanced economies

Author

Listed:
  • Gregor Semieniuk

    (University of Massachusetts Amherst
    SOAS University of London
    University of Sussex)

  • Philip B. Holden

    (The Open University)

  • Jean-Francois Mercure

    (University of Exeter
    University of Cambridge
    Cambridge Econometrics)

  • Pablo Salas

    (University of Cambridge
    University of Cambridge Institute for Sustainability Leadership (CISL))

  • Hector Pollitt

    (University of Cambridge
    Cambridge Econometrics)

  • Katharine Jobson

    (SOAS University of London
    London School of Hygiene and Tropical Medicine)

  • Pim Vercoulen

    (Cambridge Econometrics)

  • Unnada Chewpreecha

    (Cambridge Econometrics)

  • Neil R. Edwards

    (The Open University
    University of Cambridge)

  • Jorge E. Viñuales

    (University of Cambridge
    Libera Università Internazionale degli Studi Sociali (LUISS))

Abstract

The distribution of ownership of transition risk associated with stranded fossil-fuel assets remains poorly understood. We calculate that global stranded assets as present value of future lost profits in the upstream oil and gas sector exceed US$1 trillion under plausible changes in expectations about the effects of climate policy. We trace the equity risk ownership from 43,439 oil and gas production assets through a global equity network of 1.8 million companies to their ultimate owners. Most of the market risk falls on private investors, overwhelmingly in OECD countries, including substantial exposure through pension funds and financial markets. The ownership distribution reveals an international net transfer of more than 15% of global stranded asset risk to OECD-based investors. Rich country stakeholders therefore have a major stake in how the transition in oil and gas production is managed, as ongoing supporters of the fossil-fuel economy and potentially exposed owners of stranded assets.

Suggested Citation

  • Gregor Semieniuk & Philip B. Holden & Jean-Francois Mercure & Pablo Salas & Hector Pollitt & Katharine Jobson & Pim Vercoulen & Unnada Chewpreecha & Neil R. Edwards & Jorge E. Viñuales, 2022. "Stranded fossil-fuel assets translate to major losses for investors in advanced economies," Nature Climate Change, Nature, vol. 12(6), pages 532-538, June.
    • Handle: RePEc:nat:natcli:v:12:y:2022:i:6:d:10.1038_s41558-022-01356-y
    DOI: 10.1038/s41558-022-01356-y
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    References listed on IDEAS

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    Cited by:

    1. Weth, Mark A. & Baltzer, Markus & Bertram, Christoph & Hilaire, Jérôme & Johnston, Craig, 2024. "The scenario-based equity price impact induced by greenhouse gas emissions," Discussion Papers 30/2024, Deutsche Bundesbank.
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    13. Golka, Philipp, 2024. "Assets and infrastructures," SocArXiv rbqm9, Center for Open Science.
    14. Hao Dong & Tao Li, 2023. "Climate Economics and Finance: A Literature Review," Climate Economics and Finance, Anser Press, vol. 1(1), pages 29-45, November.
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    16. Mehling, M. A., 2023. "Supply-Side Crediting to Manage Climate Policy Spillover Effects," Cambridge Working Papers in Economics 2345, Faculty of Economics, University of Cambridge.
    17. Patrick Moriarty & Damon Honnery, 2022. "Renewable Energy and Energy Reductions or Solar Geoengineering for Climate Change Mitigation?," Energies, MDPI, vol. 15(19), pages 1-16, October.
    18. Boly, Mohamed & Combes, Jean-Louis & Combes Motel, Pascale, 2023. "Does environment pay for politicians?," Economic Modelling, Elsevier, vol. 128(C).
    19. Ma, Dandan & Zhang, Yunhan & Ji, Qiang & Zhao, Wan-Li & Zhai, Pengxiang, 2024. "Heterogeneous impacts of climate change news on China's financial markets," International Review of Financial Analysis, Elsevier, vol. 91(C).
    20. Giorgio Calcagnini & Germana Giombini & Edgar J. Sanchez Carrera, 2024. "Bank Lending Policies and Green Transition," Working Papers - Economics wp2024_16.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    21. Majid Mirza & Truzaar Dordi & Pedro Alguindigue & Ryan Johnson & Olaf Weber, 2023. "Sustainability in Private Capital Investing: A Systematic Literature Review," Journal of Management and Sustainability, Canadian Center of Science and Education, vol. 13(1), pages 119-119, July.
    22. Richard Bärnthaler & Andreas Novy & Lea Arzberger & Astrid Krisch & Hans Volmary, 2024. "The power to transform structures: power complexes and the challenges for realising a wellbeing economy," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.
    23. Bergman-Fonte, Clarissa & Nascimento da Silva, Gabriela & Império, Mariana & Draeger, Rebecca & Coutinho, Letícia & Cunha, Bruno S.L. & Rochedo, Pedro R.R. & Szklo, Alexandre & Schaeffer, Roberto, 2023. "Repurposing, co-processing and greenhouse gas mitigation – The Brazilian refining sector under deep decarbonization scenarios: A case study using integrated assessment modeling," Energy, Elsevier, vol. 282(C).

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