Psychoanalysis

Psychology

Exploit

Ecology

Electricity

Engineering

Economics

Fossil fuel

Valuation (finance)

Finance

Climate change

Business

Compensation (psychology)

Biology

Financial compensation

Climate policy

Computer science

Electrical engineering

Asset (computer security)

Natural resource economics

Computer security

Journal of Environmental Economics and Management

Climate policies to keep global warming below 2°C might render some of the world's fossil fuels and related infrastructure worthless prior to the end of their economic life time. Therefore, some energy-sector assets are at risk of becoming stranded. This paper investigates whether and how investors price in this risk of asset stranding. We exploit the gradual development of a German climate policy proposal aimed at reducing electricity production from coal and analyze its effect on the valuation of energy utilities. We find that investors take stranded asset risk into consideration, but that they also expect a financial compensation for their stranded assets.

Climate policy, stranded assets, and investors’ expectations