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Stranded nations? Transition risks and opportunities towards a clean economy

Author

Listed:
  • Andres, Pia
  • Mealy, Penny
  • Handler, Nils
  • Fankhauser, Samuel

Abstract

The transition away from a fossil-fuel powered economy towards a cleaner production system will create winners and losers in the global trade system. We compile a list of ‘brown’ traded products whose use is highly likely to decline if the world is to mitigate climate change, and explore which countries are most at risk of seeing their productive capabilities ‘stranded’. Using methods from economic geography and complexity, we develop novel measures of transition risk that capture the extent to which countries’ export profiles are locked-in to brown products. We show that countries exporting a high number of brown products, especially technologically sophisticated ones, could find it relatively easy to transition. Conversely, countries with exports highly concentrated in a few, low-complexity brown products have much fewer nearby diversification opportunities. Our results suggest that export complexity and diversity play a key role in determining transition risk. Path-breaking diversification strategies are needed to prevent nations from becoming stranded.

Suggested Citation

  • Andres, Pia & Mealy, Penny & Handler, Nils & Fankhauser, Samuel, 2023. "Stranded nations? Transition risks and opportunities towards a clean economy," LSE Research Online Documents on Economics 118378, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:118378
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    File URL: http://eprints.lse.ac.uk/118378/
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    References listed on IDEAS

    as
    1. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    2. Elena Verdolini & Marzio Galeotti, 2009. "At Home and Abroad: An Empirical Analysis of Innovation and Diffusion in Energy-Efficient Technologies," Working Papers 2009.123, Fondazione Eni Enrico Mattei.
    3. Verdolini, Elena & Galeotti, Marzio, 2011. "At home and abroad: An empirical analysis of innovation and diffusion in energy technologies," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 119-134, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    diversification; economic complexity; fossil fuel; green competitiveness; green growth; just transition; stranded assets; ES/R009708/1; UKRI block grant;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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