Stranded asset

An asset that loses economic value before the end of its expected useful life, often because markets, technology, regulation, or environmental conditions change.

Asset impairment: An accounting reduction in an asset’s recorded value when its carrying amount cannot be recovered. Impairment accounting can recognize the financial loss when an asset becomes stranded.
Fossil fuel divestment: The removal of fossil-fuel investments from portfolios for financial, ethical, or climate-related reasons. Concern about stranded fossil-fuel assets is a common financial rationale for divestment.
Transition risk: Financial risk arising from economic adjustments toward a lower-carbon or otherwise more sustainable system. Stranded assets are a direct channel through which climate-related transition risk affects firms and investors.
Keystone XL pipeline: A proposed pipeline intended to transport crude oil from Canada to refineries in the United States. Its cancellation after years of development illustrates how policy decisions can erase expected infrastructure value.
Depreciation: The systematic allocation of a tangible asset’s cost over its useful life. Unlike ordinary depreciation, stranding can sharply reduce value before scheduled cost allocation is complete.
Coal power plant: A facility that generates electricity by burning coal to produce steam and drive turbines. Coal plants can lose value when emissions rules, competition, or clean-energy investment shorten their operating lives.
Climate-related financial risk: Potential financial losses caused by climate change and society’s responses to it. Asset stranding is one route by which climate conditions and policy changes can generate losses.
Carbon Tracker Initiative: A financial think tank that analyzes the implications of climate change for capital markets and fossil-fuel investments. Its analysis helped popularize the link between climate limits and potentially stranded fossil-fuel assets.
Obsolescence: The loss of usefulness or desirability of an asset, often as technology or needs change. Technological or market obsolescence can strand assets even without physical failure.
Oil refinery: An industrial facility that converts crude oil into fuels and other petroleum products. Refineries face stranding risk if demand for refined fuels declines faster than expected.

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