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Capital stranding cascades: The impact of decarbonisation on productive asset utilisation

Cahen-Fourot, Louison and Campiglio, Emanuele and Dawkins, Elena and Godin, Antoine and Kemp-Benedict, Eric (2019) Capital stranding cascades: The impact of decarbonisation on productive asset utilisation. Ecological Economic Papers, 18. WU Vienna University of Economics and Business, Vienna.

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Abstract

This article develops a novel methodological framework to investigate the exposure of eco- nomic systems to the risk of physical capital stranding. Combining Input-Output (IO) and network theory, we define measures to identify both the sectors likely to trigger relevant capital stranding cascades and those most exposed to capital stranding risk. We show how, in a sample of ten European countries, mining is among the sectors with the highest external asset strand- ing multipliers. The sectors most affected by capital stranding triggered by decarbonisation include electricity and gas; coke and refined petroleum products; basic metals; and transporta- tion. From these sectors, stranding would frequently cascade down to chemicals; metal products; motor vehicles water and waste services; wholesale and retail trade; and public administration. Finally, we provide an estimate for the lower-bound amount of assets at risk of transition-related stranding, which is in the range of 0.6-8.2% of the overall productive capital stock for our sample of countries, mainly concentrated in the electricity and gas sector, manufacturing, and mining. These results confirm the systemic relevance of transition-related risks on European societies.

Item Type: Paper
Keywords: stranded assets, low-carbon transition, physical capital stocks, fossil fuels, input-output analysis, networks
Classification Codes: JEL C67; E22; L71; O10; Q32
Divisions: Departments > Sozioökonomie > Ecological Economics
Depositing User: Daniel Schmelz
Date Deposited: 01 Mar 2019 09:39
Last Modified: 06 Mar 2019 08:48
FIDES Link: https://bach.wu.ac.at/d/research/results/90375/
URI: http://epub.wu.ac.at/id/eprint/6854

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