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Investors and stranded asset risk: evidence from shareholder responses to carbon capture and sequestration (CCS) events

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  • John Byrd
  • Elizabeth S. Cooperman

Abstract

To avoid catastrophic climate change risk, the case for fossil fuel reserves not being burned has become stronger. This is particularly the case for coal, as the highest emitter of CO2 per unit of energy, with large portions of coal reserves likely to become stranded assets, posing significant risk to investors. Technology in the past has come to the rescue, so investor valuations may depend on perceptions for the success of technology in reducing stranded asset risk. We examine whether coal company shareholders perceive coal as a technologically stranded asset by studying shareholder reactions to news about CCS (carbon capture and sequestration) technology breakthroughs and setbacks. We find significant positive reactions to CCS breakthroughs, but no reaction for setbacks. This suggests investors have embedded expectations of stranded asset risk into their valuations, but also recognize the significance of successful CCS technology development and deployment for the economic prospects of the coal industry.

Suggested Citation

  • John Byrd & Elizabeth S. Cooperman, 2018. "Investors and stranded asset risk: evidence from shareholder responses to carbon capture and sequestration (CCS) events," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 8(2), pages 185-202, April.
    • Handle: RePEc:taf:jsustf:v:8:y:2018:i:2:p:185-202
    DOI: 10.1080/20430795.2017.1418063
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    Cited by:

    1. Hyeyoon Jung & João A. C. Santos & Lee Seltzer, 2023. "U.S. Banks’ Exposures to Climate Transition Risks," Staff Reports 1058, Federal Reserve Bank of New York.
    2. Gregor Semieniuk & Emanuele Campiglio & Jean‐Francois Mercure & Ulrich Volz & Neil R. Edwards, 2021. "Low‐carbon transition risks for finance," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 12(1), January.
    3. Carattini, Stefano & Sen, Suphi, 2019. "Carbon taxes and stranded assets: Evidence from Washington state," Economics Working Paper Series 1909, University of St. Gallen, School of Economics and Political Science.
    4. Breitenstein, Miriam & Anke, Carl-Philipp & Nguyen, Duc Khuong & Walther, Thomas, 2019. "Stranded Asset Risk and Political Uncertainty: The Impact of the Coal Phase-out on the German Coal Industry," MPRA Paper 101763, University Library of Munich, Germany.
    5. Hunjra, Ahmed Imran & Azam, Muhammad & Bruna, Maria Giuseppina & Taskin, Dilvin, 2022. "Role of financial development for sustainable economic development in low middle income countries," Finance Research Letters, Elsevier, vol. 47(PB).
    6. Ansari, Dawud & Holz, Franziska, 2020. "Between stranded assets and green transformation: Fossil-fuel-producing developing countries towards 2055," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 130, pages 1-1.
    7. Louis Daumas, 2021. "Should we fear transition risks - A review of the applied literature," Working Papers 2021.05, FAERE - French Association of Environmental and Resource Economists.

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