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Stranded Fossil-Fuel Assets Translate to Major Losses for Investors in Advanced Economies

Estimating Shareholder Losses through Fossil Fuel Phase Out

PERI researcher Gregor Semieniuk and co-authors 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. Semieniuk et al. 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. Rich country stakeholders therefore have a major stake in how the transition in oil and gas production is managed.

>> Read article published by Nature Climate Change Journal

>> Read press article in The Guardian
>>
Read article in The Conversation, by Gregor Semieniuk and Philip Holden
>> Read pre-published PERI working paper

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.

Recent Research

  • Reframing Incentives for Climate Policy Action

  • Jean-Francois Mercure, Pablo Salas, Pim Vercoulen, Gregor Semieniuk, Aileen Lam, Hector Pollitt, Philip B. Holden, Negar Vakilifard, Unnada Chewpreecha, Neil Edwards, Jorge E. Vinuales

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  • November 2021

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