Continued investment in industries that produce high carbon emissions is set to dramatically raise the number of “stranded assets” as the global community aims for net-zero emissions, according to researchers.
Ongoing financial support for carbon-heavy industries will significantly boost the occurrence of “stranded assets” as the world strives for net-zero emissions, experts caution.
The research evaluates the potential loss of capital—encompassing the worth of physical assets like infrastructure and, notably for this study, the economic impact on workers—if the planet achieves net zero emissions by 2050.
Stranded assets could involve scenarios such as a worker being laid off and facing a reduction in future earnings as their industry diminishes, or a coal power plant devaluing as renewable energy becomes predominant.
The investigation conducted by Exeter and Lancaster universities examines two contrasting scenarios to determine how postponing the transition might impact the total capital at stake by 2050: one scenario where investment in carbon-intensive industries ceased entirely in 2020, and another where it was delayed until 2030.
If fossil fuel investments had been completely halted in 2020, it would have put $117 trillion of global capital at risk. However, postponing this decision to 2030 raises that figure to $557 trillion, accounting for 37% of current global capital.
While these numbers represent potential maximums—and could be mitigated through retraining and retrofitting—they underscore the significant economic risks tied to ongoing investment in diminishing industries.
“The longer we delay, the more chaotic the transition will be,” commented Cormac Lynch from the University of Exeter.
“A smooth transition would enable communities to seize new opportunities as the economy evolves, whereas a chaotic one could leave some regions vulnerable to decline post-industrialization.”
When asked if the findings might suggest postponing or abandoning net-zero policies, Daniel Chester from Lancaster University stated, “The costs associated with climate change are likely to be much greater.”
“Certain elements of the transition are already underway. For instance, renewable energy sources like solar panels are now on par with fossil fuels in terms of cost, and electric vehicles are catching up rapidly.”
“Our research indicates that it’s not only ethically sound but also pragmatic to embrace this transition now rather than push against it.”
“Rather than delaying, policymakers should focus on revamping educational and financial frameworks to create new opportunities, particularly in regions reliant on fossil fuel sectors, ensuring no community is left behind.”
The global community now faces the urgent task of drastically reducing carbon emissions to meet the Paris Agreement objectives, which is critical for minimizing the adverse effects of climate change.
This transition will inevitably create new economic possibilities but will also jeopardize the value of certain current jobs and assets, investments that have been termed a “carbon bubble.”
The researchers compiled existing data to assess the composition of the global capital asset stock and their lifespan.
They simulated scenarios involving the early retirement of these capital assets (for example, buildings being taken out of service sooner than planned or workers facing unemployment) essential for fulfilling the government’s net-zero commitments, comparing these scenarios against cases where assets are allowed to function until the end of their expected lifecycle.
The study, published in the journal Environmental Research: Climate and backed by the Economic and Social Research Council through the Rebuilding Macroeconomics initiative, bears the title: “Stranded human and produced capital in a net-zero transition.”
