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Macroeconomic impact of stranded fossil fuel assets

Mercure, J.-F.; Pollitt, H.; Viñuales, J. E.; Edwards, N. R.; Holden, P. B.; Chewpreecha, U.; Salas, P.; Sognnaess, I.; Lam, A. and Knobloch, F. (2018). Macroeconomic impact of stranded fossil fuel assets. Nature Climate Change, 8 pp. 588–593.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1038/s41558-018-0182-1
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Abstract

Several major economies rely heavily on fossil fuel production and exports, yet current low-carbon technology diffusion, energy efficiency and climate policy may be substantially reducing global demand for fossil fuels1–4. This trend is incon- sistent with observed investment in new fossil fuel ven- tures1,2, which could become stranded as a result. Here, we use an integrated global economy–environment simulation model to study the macroeconomic impact of stranded fos- sil fuel assets (SFFA). Our analysis suggests that part of the SFFA would occur as a result of an already ongoing techno- logical trajectory, irrespective of whether or not new climate policies are adopted; the loss would be amplified if new cli- mate policies to reach the 2 °C target of the Paris Agreement are adopted and/or if low-cost producers (some OPEC coun- tries) maintain their level of production (‘sell out’) despite declining demand; the magnitude of the loss from SFFA may amount to a discounted global wealth loss of US$1–4 trillion; and there are clear distributional impacts, with winners (for example, net importers such as China or the EU) and losers (for example, Russia, the United States or Canada, which could see their fossil fuel industries nearly shut down), although the two effects would largely offset each other at the level of aggregate global GDP.

Item Type: Journal Item
Copyright Holders: 2018 Macmillan Publishers Limited
ISSN: 1758-6798
Project Funding Details:
Funded Project NameProject IDFunding Body
EoI NERC - Plausiable Pathways Policy Impact fundingNE/P015093/1NERC (Natural Environment Research Council)
Keywords: climate-change mitigation; energy economics; energy policy; political economy of energy
Academic Unit/School: Faculty of Science, Technology, Engineering and Mathematics (STEM) > Environment, Earth and Ecosystem Sciences
Faculty of Science, Technology, Engineering and Mathematics (STEM)
Item ID: 55387
Depositing User: Philip Holden
Date Deposited: 11 Jun 2018 14:56
Last Modified: 31 May 2019 03:54
URI: http://oro.open.ac.uk/id/eprint/55387
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