Researchers predict economic downturn if fossil fuel investment goes unchecked

Enlarge / Exxon Mobil oil-processing towers and gas-processing infrastructure. (credit: Dimas Ardian/Bloomberg via Getty Images)

An economic downturn on the level of the 2008 recession is coming if we keep investing in fossil fuels, researchers say. If fossil fuel-producing countries like the US, Canada, and Russia don't guide their economies away from oil, gas, and coal, then low-carbon technology could render at least some of those investments worthless. According to a paper in Nature Climate Change, approximately $1 trillion to $4 trillion could be lost from the global economy, even taking into account the fact that the Trump administration has hit the brakes on a lot of climate change policy in the US.

With or without the US federal government, countries and regions around the world (including US states) are pursuing policies to meet the 2C climate change goals from the Paris Agreement. At the same time, investment in fossil fuel assets continues. These assets, like drill rigs and pipelines, generally have long lifetimes, so as the world moves to low-carbon and zero-carbon technologies, we can expect that some fossil fuel assets will become valueless before the end of their projected lifetimes. Investors call these valueless assets "stranded."

"Irrespective of whether or not new climate policies are adopted, global demand growth for fossil fuels is already slowing in the current technological transition," the researchers from Radboud University in the Netherlands write. "The question then is whether, under the current pace of low-carbon technology diffusion, fossil fuel assets are bound to become stranded due to the trajectories in renewable-energy deployment, transport fuel efficiency, and transport electrification."

Read 16 remaining paragraphs | Comments