TY - JOUR
T1 - Capital stranding cascades: The impact of decarbonisation on productive asset utilisation
AU - Cahen-Fourot, Louison
AU - Campiglio, Emanuele
AU - Godin, Antoine
AU - Kemp-Benedict, Eric
AU - Trsek, Stefan
PY - 2021
Y1 - 2021
N2 - A timely low-carbon transition will require a significant decline in fossil fuel production and consumption. This in turn exposes the rest of economic sectors to the risk of reduced usability of physical capital stocks via international production network linkages. We propose and apply a simple measure to assess the extent to which fossil shocks might trigger underutilisation of capital stocks across countries and productive sectors (‘stranding multipliers’). Our results highlight the relevance of supply-side transition risks. First, among all productive activities, the global fossil sector exhibits the highest stranding multiplier on the rest of the economic system. Second, some of the most exposed sectors are downstream activities, mainly affected by second-round effects. Third, we rank countries according to their external stranding potential, finding France, Australia and Slovakia at the top, and the USA, Italy and China at its bottom. Finally, we rank countries according to their exposure to stranding risk and analyse more in depth the origins and transmission channels of the stranding links affecting some of the most exposed countries (USA, China and Germany).
AB - A timely low-carbon transition will require a significant decline in fossil fuel production and consumption. This in turn exposes the rest of economic sectors to the risk of reduced usability of physical capital stocks via international production network linkages. We propose and apply a simple measure to assess the extent to which fossil shocks might trigger underutilisation of capital stocks across countries and productive sectors (‘stranding multipliers’). Our results highlight the relevance of supply-side transition risks. First, among all productive activities, the global fossil sector exhibits the highest stranding multiplier on the rest of the economic system. Second, some of the most exposed sectors are downstream activities, mainly affected by second-round effects. Third, we rank countries according to their external stranding potential, finding France, Australia and Slovakia at the top, and the USA, Italy and China at its bottom. Finally, we rank countries according to their exposure to stranding risk and analyse more in depth the origins and transmission channels of the stranding links affecting some of the most exposed countries (USA, China and Germany).
UR - https://api.elsevier.com/content/article/PII:S0140988321004515?httpAccept=text/xml
U2 - 10.1016/j.eneco.2021.105581
DO - 10.1016/j.eneco.2021.105581
M3 - Journal article
SN - 0140-9883
VL - 103
JO - Energy Economics
JF - Energy Economics
ER -