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SUMMARY:The macroeconomic consequences of stranded fossil fuel assets - Dr
  Jean-Francois Mercure\, Radboud University\, Netherlands.
DTSTART:20181031T160000Z
DTEND:20181031T170000Z
UID:TALK111535@talks.cam.ac.uk
CONTACT:Ingrid Cizaite
DESCRIPTION:Emissions reductions in line with the Paris Agreement (PA) imp
 ly large changes in the way fossil fuels are used. Fossil fuels account fo
 r around 80% of energy consumption\; if PA targets are met\, their demand 
 would peak and decline substantially before 2050\, and reach near-zero use
  sometime between 2050 and 2100. Meanwhile\, in anticipation of some clima
 te policy being implemented\, and simply due to energy efficiency policy a
 nd technological progress\, the demand for fossil fuels may also decline w
 ith respect to expectations even without the adoption of climate policies 
 designed to achieve the PA. If the demand for fossil fuels turns out subst
 antially lower than expectations of return on investment\, a carbon bubble
  may have formed\, and a sudden burst could affect economic activity subst
 antially. In this research\, we examine whether a carbon bubble exists\, a
 nd assess the macroeconomic impacts of potential future stranded fossil fu
 el assets (SFFA)\, in other words\, fossil fuel assets that lose their val
 ue. We use an integrated energy-economy-climate assessment model\, formed 
 of a combination of a representation of technological diffusion for electr
 icity generation\, transportation and household heating with a highly disa
 ggregated macroeconometric model of the global economy\, and a fully dynam
 ical carbon cycle-climate system model of intermediate complexity. We find
  that a carbon bubble indeed is forming in the current technological traje
 ctory\, and that macroeconomic losses in the Paris Agreement scenario are 
 important and very different for different countries. Globally\, we find a
  total discounted loss to the financial sector could be of the order of $4
 tn (in 2016 dollars\; $12tn when not discounted)\, larger than the sub-pri
 me mortgage loss that triggered the 2008 financial crisis. We also find th
 at the impact on the USA would be worse when rejecting the adoption of the
  PA than when adopting climate policies\n\n \n\nDr Jean-Francois Mercure i
 s a computational scientist in the area of energy\, innovation\, macroecon
 omics and climate change. He is Assistant Professor of Energy\, Climate an
 d Innovation at Radboud University\, Nijmegen\, the Netherlands. His prima
 ry expertise lies in technological change dynamics and evolutionary econom
 ics\, as well as innovation research and complexity science. He was former
 ly deputy director of the Cambridge Centre for Climate Change Mitigation R
 esearch (4CMR) and head of its energy modelling team. He designs and build
 s computational models for climate change mitigation research\, as well as
  analyses the theoretical underpinnings of contemporary energy-economy mod
 els\, with particular attention to the process of innovation and technolog
 ical change. He co-led the development of the integrated assessment model 
 E3ME-FTT-GENIE.
LOCATION:Mill Lane Lecture Room 4
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