Here's what awaits the oil industry investors in the face of climate regulations

When an asset becomes stranded, the owner’s anticipated payoff won’t materialize.

For example, say an oil company buys drilling rights, does the exploration work, and builds an offshore oil platform. Then it discovers that demand for its product has declined so much because of climate change policies that it would cost more to extract the oil than the oil could be sold for. The oil company is owned by shareholders. Some of those shareholders are individuals. Others are companies that are in turn owned by their own shareholders. The lost profits are ultimately felt by those remote owners.

In the study, we modeled how demand for fossil fuels could decline if governments make good on their recent emissions reduction pledges and what that would mean for stranded assets. We found thatStranded assets mean a wealth loss for the owners of the assets.

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