Stranded asset
Stranded assets are "assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities".[1] Stranded assets can be caused by a variety of factors and are a phenomenon inherent in the 'creative destruction' of economic growth, transformation and innovation; as such they pose risks to individuals and firms and may have systemic implications.[2] Climate change is expected to cause a significant increase in stranded assets for carbon-intensive industries and investors, with a potential ripple effect throughout the world economy.[3][4]
The term is important to financial
The term stranded assets has gained significant prominence in environmental and climate change discourse, where the focus has been on how environment-related factors (such as climate change[4][3][7]) could strand assets in different sectors.[2] The term "climate-related asset stranding" is often used in this context.[8] This will affect oil, gas, and coal companies, and "carbon-intensive industries such as steel, aluminum, cement, plastics, and greenhouse horticulture".[4] More broadly, countries that rely on fossil fuel exports and workers with technology-specific skills can be thought of in terms of stranded assets.[4] According to the Stranded Assets Programme at the University of Oxford's Smith School of Enterprise and the Environment, some of the environment-related risk factors that could result in stranded assets are:[1]
- environmental challenges (e.g. climate change, natural capital degradation)[3][4]
- changing resource landscapes including resource depletion (e.g. shale-gas abundance, phosphate scarcity)
- new government regulations (e.g. carbon pricing, air pollution regulation, carbon bubble)
- falling clean-technology costs (e.g. solar photovoltaics, onshore wind, electric vehicles)
- evolving social norms (e.g. fossil fuel divestment campaign) and consumer behaviour (e.g. certification schemes)
- litigation (e.g. carbon liability) and changing statutory interpretations (e.g. fiduciary duty, disclosure requirements)
In the context of upstream energy production, the International Energy Agency defines stranded assets as "those investments which are made but which, at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer able to generate an economic return, as a result of changes in the market and regulatory environment."[9]
The
In discussions of electric power generation deregulation, the related term stranded costs represents the existing investments in infrastructure for the incumbent utility that may become redundant in a competitive environment.
Stranded assets by sector
Energy sector
Companies extracting
It should be mentioned here that oil companies produce not only fuel (i.e. gasoline, diesel, ...) from
If consumers indeed completely switch to emissionless fuels for powering their vehicles, then this would reduce profitability of their fossil fuel extracting installations (as less large amounts of their
- Some installations, such as oil wells for instance can be abandoned wellsare suitable for long-term storage.
- Natural gas still has a place in the hydrogen economy, assuming however if it is converted to hydrogen for use in fossil fuel power plants and if the carbon that is separated off during this process is captured and stored (see Natural gas-fired power station conversion to hydrogen).
- Companies owning coal-fired fossil-fuel power stations may other contaminants otherwise emitted from these power plants, this may help to ensure that pollution levels from the power plants are heavily reduced or eliminated. Avoiding the emission of pollutants from fossil fuel power plants is essential to help avoid the possibility of lawsuits being filed against the operators of the power plant.[19][20][21]
- Coal is generally retrieved from lung and skin problems (besides a multitude of other dangers, see mining accident). Depending on the contract closed with the miners, the mine owner can be at risk of being sued for fatal accidents and other health damage caused by the laborers working in the mine.[22] Also, the extraction of coal tends to have major cost-effectiveness and competitiveness problems when compared to other sources of energy such as natural gas,[23][24] nuclear power, ... Coal mine operation may halt because of this, and/or when the coal present in the mine runs out or is no longer easily extractable. They however can still be of use in other ways. Mines (lower shafts) for instance also often contain water and geothermal heat. These products may or may not be extractable and sellable.[25][26] In addition, old mine shafts in mines can be repurposed for grid energy storage.[27]
Some cities have
Agriculture and forestry
In agriculture and forestry, the risk of the stranding of assets is significant.[28][29]
Assets are at risk of becoming stranded due to technological advances in agriculture, changes in environmental regulations and policies and natural disasters (i.e. flooding, storms, drought, ...). Crops may be damaged or destroyed by flooding of fields, hailstorms and drought. Livestock may suffer or die due to lack of water or vegetation (grass in meadows). Also, due to climate change, weather variability has increased (see effects of climate change) and natural disasters occur more frequently, increasing the risk further.[30]
The Coller FAIRR Protein Producer Index has been created which has compiled a list of protein producing companies, giving some insight into the likeliness of some agricultural companies of being stranded. It has ranked many companies in the meat, fish and dairy sector as performing poorly.[31] [32]
The keeping of livestock typically requires a lot of space (see
Meadows (required for cattle to graze on) also aren't effective
In the Netherlands, a
In some countries, such as Ireland and the Netherlands, there is a discussion ongoing on shrinking the amount of livestock kept in the country (by in some cases, up to 50%).[38][39]
Other options are also being explored to reduce the impact of livestock on the environment such as genetic selection[40][41] introduction of methanotrophic bacteria into the rumen,[42][43] diet modification and grazing management.[44][45][46]
Some farmers have started to adopting move towards less meat production (smaller herds), but which is higher in quality (taste) and thus also in price (i.e. by feeding their livestock exclusively or predominantly with grass, ...). See organic farming and ecolabel for details on this mechanism. By using only or predominantly grass, emissions are also typically somewhat lower and taste can be improved.[47][48]
Regardless of this, some reports still speak of a large decline of livestock at least some animals (e.g. cattle) in certain countries by 2030.[33][34] The book The End of Animal Farming argues that all animal husbandry will end by 2100.[49]
Price variability of crops also poses a financial risk to farmers. Some have switched to community-supported agriculture, in which the farmer is paid a fixed price for crops he supplies to his customers on a weekly or monthly basis (subscription). This avoids price variability and thus reduces financial risk for the farmer.
Regarding forestry, there is currently much interest into
Fish production
In the fish sector,
In shrimp farming, integrated mangrove-shrimp aquaculture exists, which farms shrimp in mangroves rather than in closed ponds. This also avoids possibility of diseases occurring. In addition to this, it may be an incentive for entrepreneurs to restore mangroves in locations where they have previously been destroyed, as they can then reap the financial benefits of those newly created mangroves.
Tourism
In some low-lying coastal areas, the risk of buildings being inundated has increased due to the effects of climate change (sea level rise). However, the risk of construction (for construction companies, investors, ...) decreases if preventive measures (are planned to be) executed.
Presence of litter (non-biodegradable
Retail
Some supermarkets have started supplying more food in bulk (using dispensers, ...) and using non-plastic packaging for food (see zero-waste supermarket). This avoids costs on the purchase of plastic containers, and avoids health concerns consumers may have regarding plastic food container use (see health issues on plastic food containers).
Real estate
In the real estate industry, stranded assets can refer to buildings that have become obsolete due to changes in population, technology, and regulation.[68] Examples of this would be buildings that were once used for industrial purposes but are now no longer suitable for such uses due to new regulations on emissions. Alternatively, buildings may become stranded because there is not enough demand for them; For example, a shopping mall in an area that has seen a decrease in population or people who live nearby who can no longer afford its goods. Stranded assets are also a concern when it comes to climate change as buildings constructed before modern environmental regulations may be less energy-efficient than newer models and cost more to operate or require costly renovations in order to meet current standards.
Transport
Technology change may cause other stranded assets. For example, moving to
For freight transport, entrepreneurs can opt to transport their goods by rail or sea as an alternative to road transport (for a section or the entirety of the trajectory). This avoids possible problems such as road congestion, blind spot accidents (and other accidents) with trucks in city center streets, ... Road congestion may cause delivery delays, and accidents involving trucks may lead to legal problems[70] and represent possible extra costs for the company.
For last-mile delivery (i.e. in city centers), distribution centers can be used. They allow easy restocking of supermarkets, outlet stores, restaurants, and more in city centers. They rely on tractor units to unload their cargo in the suburban distribution center.
The products are then placed in a small truck (sometimes electrically powered
In instances where trucks need to be used for the entirety or part of the trajectory (within or outside heavily populated zones),
See also
- Recycling concrete of abandoned buildings
- Carbon bubble
- Carbon offsetting: used by companies to reduce their carbon emissions
- Carbon tax: internal carbon taxes are levied by companies to reduce climate change-related risk exposure
- Climate lawsuit
- Disruptive innovation
- Environmental stewardship
- Economics of climate change
- Ghost town repopulation
- Leapfrogging
- Land recycling
References
- ^ a b "Stranded Assets Programme". Smith School of Enterprise and the Environment. 25 March 2014. Archived from the original on 27 March 2014. Retrieved 11 April 2014.
- ^ a b Background Briefing, UNEP Inquiry into the Design of a Sustainable Financial System (PDF), United Nations Environment Programme, June 2014, archived from the original (PDF) on 2014-10-06, retrieved 2014-07-09
- ^ S2CID 244242414. Retrieved 21 January 2022.
- ^ ISSN 1941-1340.
- ^ "IAS 16". Deloitte. 9 July 2014. Retrieved 9 July 2014.
- ^ "Stranded Asset". Business Dictionary. Archived from the original on 13 April 2014. Retrieved 11 April 2014.
- Carbon Tracker Initiative. 9 July 2014. Retrieved 9 July 2014.
- S2CID 216314404.
- ^ WEO Special Report 2013: Redrawing the Energy Climate Map (PDF), IEA, 10 June 2013, archived from the original (PDF) on 12 June 2019, retrieved 9 July 2014
- ^ "Nuclear Power in Japan | Japanese Nuclear Energy - World Nuclear Association". world-nuclear.org. Retrieved 29 August 2020.
- ^ Simon, Frédéric; Taylor, Kira (2021-04-14). "The Green Brief: Europe's anti-nuclear madness". EURACTIV.
- ^ "Japan - is there a future in nuclear?". Nuclear Engineering International. 4 July 2018. Retrieved 14 September 2018.
- ^ Silverstein, Ken. "Japan Circling Back To Nuclear Power After Fukushima Disaster". forbes.com. Retrieved 12 January 2018.
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- ^ "ExxonMobil and Synthetic Genomics report breakthrough in algae biofuel research". ExxonMobil. Archived from the original on 2021-11-25. Retrieved 2021-02-28.
- ^ See Novamont example at Biorefinery article, subsection examples
- ^ Siemens Gamesa ETES-switch solution (PDF), archived from the original (PDF) on 2021-10-09, retrieved 2021-04-23
- ^ Carbon Dioxide (CO2) Capture at Coal-Fired Power Plants (PDF)
- ^ "U.S. Expands Clean Air Act Lawsuits Against Electric Utilities". EPA. March 1, 2000.
- ^ Coal plant litigation
- ^ Coal-Fired Power Plant Enforcement
- ^ Miner sues coal companies for $4.2m over black lung disease
- ^ Five charts that show why Trump can't deliver on his coal promises
- ^ There's no bringing coal back
- S2CID 10957010.
- S2CID 111317145.
- ^ Gravitricity is working on this for instance
- ^ Managing the risk of stranded assets in agriculture and forestry
- ^ Stranded assets in agriculture
- ^ Managing stranded assets and protecting food value chains from natural disasters
- ^ Could climate change make cows the next stranded asset?
- ^ Meat and dairy suppliers put climate commitments of food giants in doubt
- ^ a b Rethink X: food and agriculture
- ^ a b Rethinking agriculture report
- ^ Nation’s First Fully Automated Vertical Farm Breaks Ground in Ohio
- ^ Said-Moorhouse, Lauren (29 May 2012). "'Vertical farm' blossoms at meatpacking plant". CNN. Retrieved 2019-10-31.
- ^ IPCC Special Report on Land Use, Land-Use Change, and Forestry
- ^ [ https://www.thejournal.ie/farming-climate-change-4770399-Aug2019/ They're telling us the herd needs to be reduced by 50%]
- ^ "VVD: 'Veestapel hoeft niet in te krimpen' - Nieuws Stikstof".
- ^ "Bovine genomics project at Genome Canada". Archived from the original on 2019-08-10. Retrieved 2020-12-02.
- ^ "Canada Is Using Genetics to Make Cows Less Gassy". Wired. 2017-06-09. Archived from the original on 2023-05-24.
- ^ The use of direct-fed microbials for mitigation of ruminant methane emissions: a review
- S2CID 89217740.
- doi:10.4141/a03-109.
- ^ Martin, C. et al. 2010. Methane mitigation in ruminants: from microbe to the farm scale. Animal 4 : pp 351-365.
- .
- ^ Understanding Markets for Grass-Fed Beef: Consumer Taste, Price, and Purchase Preferences
- ^ Eat less meat, of better quality: don’t do it with sadness. Do it with joy!
- ISBN 9780807039878.
- ^ Livestock Farming Systems and their Environmental Impact
- ISBN 978-1-55963-370-3.
- ^ "Palm oil: Cooking the Climate". Greenpeace. 8 November 2007. Archived from the original on 10 April 2010. Retrieved 30 January 2013.
- ^ "The bird communities of oil palm and rubber plantations in Thailand" (PDF). The Royal Society for the Protection of Birds (RSPB). Archived (PDF) from the original on 6 October 2016. Retrieved 4 October 2016.
- ^ Foster, Joanna M. (1 May 2012). "A Grim Portrait of Palm Oil Emissions". The New York Times. Archived from the original on 16 January 2013. Retrieved 30 January 2013.
- ISSN 1748-9326.
- ^ "Palm oil threatening endangered species" (PDF). Center for Science in the Public Interest. May 2005. Archived (PDF) from the original on 17 September 2012.
- ^ "Camera catches bulldozer destroying Sumatra tiger forest". World Wildlife Fund. 12 October 2010. Archived from the original on 16 January 2013. Retrieved 30 January 2013.
- PMID 28186155.
- PMID 26474765.
- ^ "The role of protected areas in regard to climate change" (PDF). Archived from the original (PDF) on 2021-11-05. Retrieved 2023-07-24.
- ^ "30x30 for Nature Petition". Archived from the original on 2021-11-27. Retrieved 2023-07-24.
- ^ Protecting 50% of our lands and oceans
- ^ a b "The natural world can help save us from climate catastrophe | George Monbiot". The Guardian. 2019-04-03. Archived from the original on 2023-07-01.
- .
- ^ See Finless Foods example at Cultured meat
- ^ Paradise lost? Travel and tourism industry takes aim at plastic pollution
- ^ The year Bali tourism stopped (see section on Sungai Watch and transcripts)
- ^ "Was sind Stranded Assets im Immobilienwesen und wie kann man sich dagegen schützen?". GMS (in German). Retrieved 2023-05-12.
- ^ The Age of Stranded Assets isn't just about Climate Change
- ^ Liability Issues in a No-Zone Truck Accident Case
- ^ City depot employing a few electric trucks Archived September 12, 2014, at the Wayback Machine
- ^ See Starsky Robotics, openpilot, ...
- ^ see examples at driverless truck article
External links
- Stranded Assets Programme Archived 2017-10-26 at the Wayback Machine. University of Oxford.
- Stranded Assets. Carbon Tracker