International researchers – including experts from The Open University – have mapped the distribution of over $1 trillion losses from potentially worthless oil and gas assets to the individuals, pension funds and governments who will be impacted, as nations rush to reach their pledges of achieving \u2018net-zero\u2019.<\/p>\n
Driven by technological, societal, and political change, renewable energy technologies are replacing fossil fuels. This latest research – published in Nature Climate Change and coordinated by the OU – has highlighted the potential losses due to oil and gas being over-produced and becoming \u2018stranded assets\u2019 (assets with an unanticipated or premature loss in value). Going a step further, it identified which organisations and individuals face the biggest financial blow as a result.<\/p>\n
The potential cost of overvaluing oil and gas assets could be over $1 trillion, a figure higher than the housing market mispricing that triggered the global 2007 financial crisis.<\/p>\n
Dr Philip Holden, Senior Lecturer in Earth System Science<\/strong><\/a> at the OU who co-led the research,<\/strong> developed an \u2018equity ownership network\u2019 model to map the financial losses to their ultimate owners.<\/p>\n The international team of researchers examined over 40,000 oil and gas production assets and estimated their output and value under a scenario with strict but plausible climate policies.<\/p>\n The researchers found that approximately $550 billion of losses are located in OECD (Organisation for Economic Co-operation and Development) member countries, which includes the UK, United States and over 30 other developed nations. Nearly $300 billion worth of production losses were identified in the US alone.<\/p>\n They mapped these losses initially to oil and gas companies, and then through intermediaries like financial institutions to their ultimate owners, passing through an \u2018equity ownership network\u2019 of 1.8 million companies before they were finally allocated to either governments or individuals through funds or shareholdings.<\/p>\n Additionally, Dr Holden points out:<\/p>\n \u201cThe complex network of equity ownership transfers more than $200 billion of additional stranded asset risk to OECD-based investors, including $100 billion of losses originating at Russian oil and gas fields.\u201d<\/em><\/p><\/blockquote>\nComplex network of equity ownership revealed<\/h2>\n