Stranded Assets: Research Gaps and Implications for Climate Policy

Abstract

Many types of capital stocks—natural, physical, and human—stand to lose value because of climate policy and to become “stranded.” The owners of such assets will resist climate policies. We survey the recent climate economics literature and highlight research gaps related to stranded assets. In line with recent literature in political science, we argue that economists can provide more effective policy recommendations by putting greater emphasis on the distributional consequences of asset stranding. Our recommended policies focus on targeting new capital stocks related to energy production and consumption: banning fossil-intensive investment and encouraging investment into renewable and energy-efficient capital. These policies may face less resistance than price-based mechanisms and could improve the credibility of future carbon pricing.