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

Cahen-Fourot, Louison ORCID: https://orcid.org/0000-0003-2580-1982 and Campiglio, Emanuele ORCID: https://orcid.org/0000-0002-2790-5614 and Godin, Antoine ORCID: https://orcid.org/0000-0001-9125-4986 and Kemp-Benedict, Eric ORCID: https://orcid.org/0000-0001-5794-7172 and Trsek, Stefan ORCID: https://orcid.org/0000-0002-6178-2486 (2021) Capital stranding cascades: The impact of decarbonisation on productive asset utilisation. Ecological Economic Papers, 37. WU Vienna University of Economics and Business, Vienna.

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Abstract

The aim of this article is to assess the exposure of economic systems to the risk of physical capital stranding following a reduction of fossil fuel production and use. We calculate cross-sectoral and cross-country ‘marginal stranding multipliers’ for 43 regions, and study how supply-side capital stranding might propagate via international production networks. We show how the fossil industry has the potential of creating significant stranding cascades affecting downstream sectors and the economic system as a whole. We then focus on cross-country stranding impacts and rank countries according to their external stranding potential and to their exposure to external strandingrisk. Finally, we analyse more in depth the origins and transmission channels of the stranding links affecting the most exposed countries (US, China and Germany). Our results confirm the relevance of including multi-regional production networks and physical capital stranding into the ongoing effort to assess the macro-financial implications of a low-carbon transition.

Item Type: Paper
Keywords: low-carbon transition; asset stranding; production networks; capital stocks; fossilfuels; supply-side policies
Classification Codes: JEL C67; E22; L71; O10; Q32
Divisions: Departments > Sozioökonomie > Ecological Economics
Depositing User: Verena Konrad
Date Deposited: 23 Feb 2021 14:05
Last Modified: 23 Feb 2021 14:05
Related URLs:
URI: https://epub.wu.ac.at/id/eprint/8007

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