This term is generally used to refer to assets that belong to utility companies
and companies involved in the extraction of fossil fuels, such as oil, gas and
coal. A variety of factors can lead to assets becoming stranded, including
regulations that limit the use of fossil fuels, a change in demand, such as the
shift towards renewable energy, or legal action.
The Paris Agreement initiated by the United Nations Framework Convention on
Climate Change, which deals with greenhouse gas emissions mitigation, adaptation
and finance (signed in 2016), signaled an increase in ambition for targets,
which could leave more assets stranded in future.
According to a study in Nature, International Journal of Science, an estimated
one-third of oil reserves, half of gas reserves and 82% of known coal reserves
should remain unused in order to meet global temperature targets under the Paris
Climate change risk management, including carbon asset risk, is becoming a
significant governance issue for corporations, governments and municipalities.
Journal of Science