This month Nature Climate Change published an article estimating the potential macroeconomic impact of stranded fossil fuel assets across countries and according to different scenarios. In their study, they found that a certain amount of stranded fossil fuel assets will already occur due to the ongoing technological trajectory. Moreover, if new 2°C-compliant policies are implemented, the loss in global wealth may range from USD 1 bn to USD 4 bn, the latter being comparable to the loss of the 2008 financial crisis.
Stranded fossil fuel asset losses and impacts across countries
According to the article, implementing new 2°C-aligned policies will create winners and losers. As these policies would result in a decline in fossil fuel demand, net importers (mainly the EU and China) could stand to gain from these policies. Producers with high marginal costs of fossil fuel production – like the United-States, Canada, and Russia – would be the losers in this scenario. Furthermore, a single producing country cannot alter the trajectory on its own. Only the decisions of the sum of the consuming countries determine the amount of wealth lost. This should be considered by policymakers willing to revive fossil fuel industries unless they are betting that we will not be able to limit the increase in global temperature at 2°C above pre-industrial levels.
Ruben Haalebos, Data Analyst – Sources: Beyond Ratings, Nature Climate Change