Editing IPCC:AR6/WGIII/Chapter-6 (section)

=== Box 6.13 | Stranded Assets ===

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Limiting warming to 2°C (&gt;67%) or lower will result in stranded assets ( ''high confidence'' ). Stranded assets can be broadly defined as assets that ‘suffer from unanticipated or premature write-offs, downward revaluations or [conversion] to liabilities’. Stranded assets may create risks for financial market stability and macro-economic stability (Battiston et al. 2017; [[#Mercure--2018|Mercure et al. 2018]] ; Sen and von Schickfus 2020), and they will result in a rapid loss of wealth for the owners of affected assets ( [[#Vogt-Schilb--2017|Vogt-Schilb and Hallegatte 2017]] ; [[#Ploeg--2020|Ploeg and Rezai 2020]] ).

There are two types of stranded assets: fossil-fuel resources that cannot be burned; and premature retirement of fossil infrastructure (e.g., power plants). About 30% of oil, 50% of gas, and 80% of coal reserves will remain unburnable if warming is limited to 2°C ( [[#Meinshausen--2009|Meinshausen et al. 2009]] ; [[#Leaton--2011|Leaton 2011]] ; Leaton Ranger 2013; [[#McGlade--2015|McGlade and Ekins 2015]] ; [[#Bauer--2016|Bauer et al. 2016]] ; [[#IRENA--2017b|IRENA 2017b]] ; [[#Pye--2020|Pye et al. 2020]] ) ( ''high confidence'' ). Significantly more reserves are expected to remain unburned if warming is limited to 1.5°C. Countries with large oil, gas, and coal reserves are most at risk ( [[#Caldecott--2017|Caldecott et al. 2017]] ; [[#Ansari--2020|Ansari and Holz 2020]] ).

About 200 GW of fossil fuel electricity generation per year will likely need to be retired prematurely after 2030 to limit warming to 2°C, even if countries achieve their Nationally Determined Contributions (NDCs) ( ''medium confidence'' ) ( [[#Iyer--2015|Iyer et al. 2015]] ; [[#Johnson--2015|Johnson et al. 2015]] ; [[#Fofrich--2020|Fofrich et al. 2020]] ). Limiting warming to 1.5°C will require significantly more rapid premature retirement of electricity generation capacity ( [[#Binsted--2020|Binsted et al. 2020]] ). Coal- and gas-fired power plants will likely need to retire about 25 years earlier than in the past to limit warming to 2°C, and 30 years earlier to limit warming to 1.5°C ( [[#Cui--2019|Cui et al. 2019]] ; [[#Fofrich--2020|Fofrich et al. 2020]] ). Coal-fired power plants are at significantly greater risk of stranding compared with gas-fired and oil-fired plants ( [[#Iyer--2015|Iyer et al. 2015]] ; [[#Johnson--2015|Johnson et al. 2015]] ; [[#Fofrich--2020|Fofrich et al. 2020]] ). The risks of stranded power plants are greatest in countries with newer fossil infrastructure.

If warming is limited to 2°C, the discounted economic impacts of stranded assets, including unburned fossil reserves, could be as high as USD1–4 trillion from 2015 through 2050 (USD10–20 trillion in undiscounted terms) ( ''medium confidence'' ) ( [[#IRENA--2017c|IRENA, 2017c]] ; [[#Mercure--2018|Mercure et al. 2018]] ). About 40% of these impacts correspond to unburned fossil reserves ( [[#IRENA--2017b|IRENA 2017b]] ). If warming is limited to 1.5°C, the economic impacts of stranded assets are expected to be significantly higher ( [[#Binsted--2020|Binsted et al. 2020]] ).

Stronger near-term mitigation will reduce premature retirements of fossil infrastructure, because more rapid mitigation will decrease new builds of fossil infrastructure that might later be stranded ( [[#Johnson--2015|Johnson et al. 2015]] ; [[#Bertram--2018|Bertram et al. 2018]] ) ( ''high confidence'' ). For example, if warming is limited to 2°C, strengthening the NDC pledges beyond their 2015 levels could decrease stranded electricity sector assets by more than 50% ( [[#Iyer--2015|Iyer et al. 2015]] ). By contrast, if countries fail to meet their NDCs and continue to build fossil infrastructure, mitigation will need to be accelerated beyond 2030, resulting up to double the amount of stranded electricity generation capacity ( [[#Iyer--2015|Iyer et al. 2015]] ). This corresponds to a total undiscounted cost of about USD2 trillion from electricity infrastructure alone, from the period 2015 to 2050 (IRENA 2017). CCS (6.4) could potentially help reduce hundreds of gigawatts stranded power plant capacity along with other fossil-based capital ( [[#Clark--2014|Clark and Herzog 2014]] ; [[#Iyer--2017|Iyer et al. 2017]] ; [[#Fan--2018|Fan et al. 2018]] ).

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