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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.The necessary and rapid transition to a low-carbon economy will lead to massive stranded assets, which could risk the stability of financial markets and the economy. Through a global equity network, most risk and responsibility is owned by investors, such as pension funds, in developed countries.

The urgency of estimating the impact of climate risks on the financial system is increasingly recognized among scholars and practitioners. By adopting a network approach to financial dependencies, we look at how climate policy risk might propagate through the financial system. We develop a network-based climate stress-test methodology and apply it to large Euro Area banks in a ‘green’ and a ‘brown’ scenario. We find that direct and indirect exposures to climate-policy-relevant sectors represent a large portion of investors’ equity portfolios, especially for investment and pension funds. Additionally, the portion of banks’ loan portfolios exposed to these sectors is comparable to banks’ capital. Our results suggest that climate policy timing matters. An early and stable policy framework would allow for smooth asset value adjustments and lead to potential net winners and losers. In contrast, a late and abrupt policy framework could have adverse systemic consequences. The financial system will be impacted by climate policies. Network analysis of the exposures of financial actors to climate-relevant sectors in the Euro Area shows early implementation of climate policy is needed to avoid adverse systemic consequences.

The decarbonisation of the electricity grid is expected to create new electricity flows. As a result, it may require that network planners make a significant amount of investments in the electricity grids over the coming decades so as to allow the accommodation of these new flows in a way that both the thermal and voltage network constraints are respected. These investments may include a portfolio of infrastructure assets consisting of traditional technologies and smart grid technologies. One associated key challenge is the presence of uncertainty around the location, the timing, and the amount of new demand or generation connections. This uncertainty unavoidably introduces risk into the investment decision-making process as it may lead to inefficient investments and inevitably give rise to excessive investment costs. Smart grid technologies have properties that enable them to be regarded as investment options, which can allow network planners to hedge against the aforementioned uncertainty. This paper focuses on key smart technologies by providing a critical literature review and presenting the latest mathematical modelling that describes their operation.

Momentum to phase out unabated coal use is growing globally. This transition is critical to meeting the Paris climate goals but can potentially lead to large amounts of stranded assets, especially in regions with newer and growing coal fleets. Here we combine plant-level data with a global integrated assessment model to quantify changes in global stranded asset risks from coal-fired power plants across regions and over time. With new plant proposals, cancellations, and retirements over the past five years, global net committed emissions in 2030 from existing and planned coal plants declined by 3.3 GtCO 2 (25%). While these emissions are now roughly in line with initial Nationally Determined Contributions (NDCs) to the Paris Agreement, they remain far off track from longer-term climate goals. Progress made in 2021 towards no new coal can potentially avoid a 24% (503 GW) increase in capacity and a 55% ($520 billion) increase in stranded assets under 1.5 °C. Stranded asset risks fall disproportionately on emerging Asian economies with newer and growing coal fleets. Recent no new coal commitments from major coal financers can potentially reduce stranding of international investments by over 50%.

Countries are urged to advance the energy transition in a just, orderly, and equitable manner, yet the appropriate pathway remains unclear. Using a provincial-level, hourly-dispatched power system model of China that incorporates intertemporal decisions on early retirement and carbon capture retrofitting, our study reveals that for coal-rich but gas-poor economies, repositioning coal power from a baseload resource to a flexibility provider can accelerate net-zero transition of the power system in three aspects. First, when achieving the same emissions reduction target, it mitigates stranded assets by decreasing the average lifespan loss of coal power by 7.9-9.6 years and enhancing the long-term competitiveness of retrofitted coal power. Second, it enables the integration of an additional 194-245 gigawatts of variable renewables by 2030 under the same carbon emissions reduction trajectory. Third, it reduces China’s power system transition costs by approximately 176 billion U.S. Dollars, particularly in the face of costly gas power and energy storage technologies. These robust findings underscore the need for appropriate policies to incentivize the flexible dispatch, orderly retirement, and carbon capture retrofitting of coal power, thereby accelerating the decarbonization of China’s power system. A study on China finds that repositioning coal power from a baseload resource to a flexibility provider can accelerate the net-zero transition by mitigating stranded assets, enabling greater integration of renewables, and reducing transition costs.

Achieving the Paris Agreement's near-term goals (nationally determined contributions, or NDCs) and long-term temperature targets could result in pre-mature retirement, or stranding, of carbon-intensive assets before the end of their useful lifetime. We use an integrated assessment model to quantify the implications of the Paris Agreement for stranded assets in Latin America and the Caribbean (LAC), a developing region with the least carbon-intensive power sector in the world. We find that meeting the Paris goals results in stranding of $37-90 billion and investment of $1.9-2.6 trillion worth of power sector capital (2021-2050) across a range of future scenarios. Strengthening the NDCs could reduce stranding costs by 27%-40%. Additionally, while politically shielding power plants from pre-mature retirement or increasing the role of other sectors (e.g. land-use) could also reduce power sector stranding, such actions could make mitigation more expensive and negatively impact society. For example, we find that avoiding stranded assets in the power sector increases food prices 13%, suggesting implications for food security in LAC. Our analysis demonstrates that climate goals are relevant for investment decisions even in developing countries with low emissions.

Thoroughly assessing the owners and distribution of stranded assets in a 2 °C scenario is essential to anticipate climate policy resistance. We employ novel data to analyze owners and incidence of asset stranding in the power sector globally. We show that Asia-Pacific, Europe, and the US are highly exposed to stranded assets, especially coal plants. Stranded assets are highly concentrated in a few asset owners in some countries (e.g., India). Even if owners are more equally exposed (e.g., in the US) they can vary considerably in the asset stranding timing due to differences in plant fleets’ age profile. European, US, and Chinese asset owners own large shares of stranded coal plants abroad. Listed owners may face stranded assets of up to 78% of their share price or more than 80% of their equity. Asset stranding exposure positively correlates with ownership of alternative energy assets. India stands out owning many stranded assets but little alternative energy. Von Dulong analyzes owners and incidence of asset stranding in the power sector globally. She shows that Asia-Pacific, Europe, and the US are highly exposed to stranded assets, especially coal plants and explores the linkages between asset stranding and climate policy resistance.

A transition away from coal power always maintains a high level of complexity as there are several overlapping considerations such as technical feasibility, economic costs, and environmental and health impacts. Here, we explore the cost-effectiveness uncertainty brought by policy implementation disturbances of different coal power phaseout and new-built strategies (i.e., the disruption of phaseout priority) in China based on a developed unit-level uncertainty assessment framework. We reveal the opportunity and risk of coal transition decisions by employing preference analysis. We find that, the uncertainty of a policy implementation might lead to potential delays in yielding the initial positive annual net benefits. For example, a delay of six years might occur when implementing the prior phaseout practice. A certain level of risk remains in the implementation of the phaseout policy, as not all strategies can guarantee the cumulative positive net benefits from 2018–2060. Since the unit-level heterogeneities shape diverse orientation of the phaseout, the decision-making preferences would remarkably alter the selection of a coal power transition strategy. More strikingly, the cost-effectiveness uncertainty might lead to missed opportunities in identifying an optimal strategy. Our results highlight the importance of minimizing the policy implementation disturbance, which helps mitigate the risk of negative benefits and strengthen the practicality of phaseout decisions. China’s use of coal is complex to establish a clean and low-carbon transition for the country. With an uncertainty assessment framework, this study displays the risks of missing opportunities in obtaining cumulative positive net benefits and identifying an optimal transition strategy.

Stranded assets, as a significant risk outcome of climate change and the low-carbon transition, may severely affect socioeconomic development and financial system stability; accordingly, related research has emerged as an important academic frontier in economics, finance, and political science. This paper systematically reviews the existing literature on stranded assets, presenting four core findings. First, the notion of stranded assets has matured from a narrow focus on ‘impaired assets’ to a comprehensive framework encompassing stranded resources, stranded capital, and stranded paper, driven by factors including unburnable carbon constraints, transition-risk policies, physical climate damages, and environmental liability attribution. Second, scale assessments typically combine top–down scenario design under stringent carbon budgets with bottom–up model construction. Third, stranded assets inflict significant financial shocks on fossil fuel upstream and downstream firms and transmit risk to the broader financial system via institutional investor exposures and systemic vulnerabilities; uneven regional risk distribution and intergenerational and international equity concerns may further trigger political risks. Finally, mitigation strategies involve portfolio optimization, accelerated renewable energy deployment, enhanced climate risk disclosure, and macroprudential policy tools. Future research should deepen the comprehensive quantification of multiple asset types, conduct micro-level empirical analyses, implement short-term dynamic monitoring, and develop equitable distribution mechanisms to support precise risk management and effective low-carbon transition decision-making.

With the Glasgow Climate Pact 2021, the global community has committed explicitly to phasing down coal consumption. Yet the coal supply sector continues to develop new capacities, despite the risk of asset stranding. This article presents the first assessment of the implications of 1.5 ∘ C mitigation pathways for the coal mining industry. Based on open coal mine data and a new version of the open coal sector model COALMOD-World, the prospects for individual coal mining regions and their risk of early mine closures and asset stranding are analyzed. Results show that global cumulative production capacity from operating thermal coal mines exceed the remaining consumption values for 2020 through 2050 by more than 50%. This supply-consumption discrepancy would hit Russia and the USA especially hard, causing the stranding of around 80% of operating capacities in each case. But the early closure of operating coal mines would affect all of the world’s major thermal coal producing regions, with most regions seeing more than three-fourths of their mine capacity closing early by 2030. Stranded assets from operating coal mines would total some USD 2015 120 to 150 billion until 2050, with an additional USD 2015 100 billion should currently proposed new coal mining projects be realized. If demand declines in accordance with 1.5 ∘ C pathways, new coal mines or mine extensions would be redundant in all coal regions. Although the stranded asset value of mines is relatively small compared to that of the coal power plant sector, early closures would especially affect workers and local communities. Thus, efforts are urgently needed to ensure a just transition in coal mining regions and to address excess operating and proposed coal supply capacities that continue to fuel global warming.