Moving to a Low-Carbon Economy

The report estimates that a transition to a low-carbon economy could put nearly $25 trillion of fossil fuel asset value at risk, with approximately 80% of this risk borne by governments rather than private investors. The analysis highlights that oil represents the majority of value at risk (close to 75%), while coal offers the highest emissions reduction potential with relatively low stranding risk (12%). The document argues that the net economic impact depends heavily on policy: a purely tax-based approach to reducing oil demand could cost the global economy $3 trillion, whereas an innovation-led transition could yield a net benefit of $7 trillion. It recommends prioritizing the phase-out of coal and utilizing financial mechanisms to lower the cost of renewable energy in emerging markets.

• Governments and taxpayers bear the vast majority of stranding risk, with governments owning 50-70% of global oil, gas, and coal resources. Under the analyzed scenarios, governments would bear close to 80% of the $25 trillion value difference for producers.
• The total value at risk is estimated at just under $25 trillion, but this figure includes transfers between governments and their own citizens. When these internal transfers are excluded, the total value at risk drops to approximately $15 trillion.
• Oil accounts for nearly 75% of the fossil fuel asset value at risk due to high profit margins and marginal production costs, despite contributing less than 15% of the emissions reductions in the IEA's low-carbon scenario.
• Coal provides the most significant opportunity for emissions reductions with minimal stranding risk, accounting for approximately 80% of projected carbon emissions savings while representing only 12% of potential stranded asset value.
• The economic outcome of the transition is highly sensitive to policy choice. A pathway relying solely on price-based tools (like taxes) to reduce oil demand would result in a global net stranding cost of $3 trillion, whereas a pathway driven by innovation and technology could create a net gain of $7 trillion.
• Net oil consuming regions, including the U.S., EU, China, and India, would benefit from demand-reduction policies even if they act independently of net producing countries, potentially capturing 95% of the financial benefit of global action.
• Natural gas is identified as a medium-term bridging fuel in power generation, but to minimize stranding risk, its usage must peak around 2030.
• In emerging economies, the cost of renewable energy can be reduced by up to 30% through financial mechanisms such as dollarizing renewable energy tariffs or providing subsidies via low-cost debt.
• Developed economies in the U.S. and EU can largely meet 450 ppm targets for coal-fired power by retiring plants at the end of their natural lives (40 years for those without pollution controls and 60 years for those with them).
• Delaying policy action increases the risk that new investments will be made in assets that will eventually be stranded, thereby increasing the total cost of the transition.

APA

Nelson, D., Hervé-Mignucci, M., Goggins, A., Szambelan, S. J., Vladeck, T., & Zuckerman, J. (2014). Moving to a Low-Carbon Economy. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Impacts-of-Policy-Pathways-on-Fossil-Fuel-Asset-Values.pdf

Chicago

Nelson, David, Morgan Hervé-Mignucci, Andrew Goggins, Sarah Jo Szambelan, Thomas Vladeck, and Julia Zuckerman. Moving to a Low-Carbon Economy. Climate Policy Initiative, 2014. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Impacts-of-Policy-Pathways-on-Fossil-Fuel-Asset-Values.pdf.

Wikipedia

{{cite report |last1=Nelson |first1=David |last2=Hervé-Mignucci |first2=Morgan |last3=Goggins |first3=Andrew |last4=Szambelan |first4=Sarah Jo |last5=Vladeck |first5=Thomas |last6=Zuckerman |first6=Julia |title=Moving to a Low-Carbon Economy |publisher=Climate Policy Initiative |date=October 2014 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Impacts-of-Policy-Pathways-on-Fossil-Fuel-Asset-Values.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nelson2014moving, author = {Nelson, David and Hervé-Mignucci, Morgan and Goggins, Andrew and Szambelan, Sarah Jo and Vladeck, Thomas and Zuckerman, Julia}, title = {{Moving to a Low-Carbon Economy}}, institution = {Climate Policy Initiative}, year = {2014}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Impacts-of-Policy-Pathways-on-Fossil-Fuel-Asset-Values.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }