• DOI:10.1038/s41558-018-0182-1
• Corpus ID: 89799744

Macroeconomic impact of stranded fossil fuel assets

@article{Mercure2018MacroeconomicIO,
  title={Macroeconomic impact of stranded fossil fuel assets},
  author={Jean-François Mercure and Hector Pollitt and Jorge E. Vi{\~n}uales and Neil Robert Edwards and Philip B. Holden and Unnada Chewpreecha and Pablo Salas and Ida Sognnaes and A. Lam and Florian Knobloch},
  journal={Nature Climate Change},
  year={2018},
  volume={8},
  pages={588-593}
}

• J. Mercure, H. Pollitt, +7 authors F. Knobloch
• Published 4 June 2018
• Economics, Environmental Science
• Nature Climate Change

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 inconsistent with observed investment in new fossil fuel ventures1,2, which could become stranded as a result. Here, we use an integrated global economy–environment simulation model to study the macroeconomic impact of stranded fossil fuel assets (SFFA). Our analysis suggests that part of the SFFA would occur as a result of an already ongoing technological trajectory, irrespective of whether or not new climate policies are adopted; the loss would be amplified if new climate policies to reach the 2 °C target of the Paris Agreement are adopted and/or if low-cost producers (some OPEC countries) 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.New fossil fuel investments may become stranded if demand for fossil fuel declines due to technological change. This could amount to a discounted global wealth loss of US$1–4 trillion, with the negative impact for producer countries amplified by climate mitigation policies of consumer countries.