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Cambridge Centre for Environment, Energy and Natural Resource Governance

In a new study published in Nature Climate Change by C-EENRG fellows and colleagues, a model based on plausible changes in expectations of future oil and gas demand identifies the ultimate financial owners of potential stranded assets to be predominantly OECD-based individual investors (through pension funds and shareholdings) and governments of non-OECD countries.

In the paper, the 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. The equity risk ownership from 43,439 oil and gas production assets is traced 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 study has been covered by The Guardian: 'People in US and UK face huge financial hit if fossil fuels lose value, study shows'.

Reference: Semieniuk, G., Holden, P. B., Mercure, J. F., Salas, P., Pollitt, H., Jobson, K., Vercoulen, P., Chewpreecha, U., Edwards, N. R., & Viñuales, J. E. (2022). Stranded fossil-fuel assets translate to major losses for investors in advanced economies. Nature Climate Change, 1-19.