Most fossil fuel resources must remain unused to comply with the Paris Agreement on Climate Change. Scholars and policymakers debate which approaches should be undertaken to Leave Fossil Fuels Underground (LFFU). However, existing scholarship has not yet inventoried and evaluated the array of approaches to LFFU based on their effectiveness, equity, or feasibility. Hence, this review article asks: What lessons can we learn from reviewing scholarship on proposed approaches to leaving fossil fuels underground (LFFU)? We identify 28 unique LFFU approaches, of which only 12 are deemed environmentally effective (e.g., fossil fuel extraction taxes, bans and moratoria, and financial swaps); eight involve moderate‐to‐high (non‐)monetary costs, and only four are deemed entirely just and equitable. Of the 12 environmentally effective approaches: only three were deemed cost‐effective (regulating financial capital for fossil fuel projects, removing existing fossil fuel subsidies, and bans & moratoria); merely four were deemed equitable (asset write‐offs, retiring existing fossil infrastructure, pursuing court cases/litigation, and financial swaps); and all were deemed institutionally problematic in terms of their feasibility (six were challenging to implement as they threatened the vested interests of powerful stakeholder groups). Moreover, the reviewed scholarship draws heavily on empirical studies of how these LFFU approaches can be optimized in European, North American, and Chinese contexts; fewer studies have explored the effectiveness and fairness of LFFU approaches in the South and/or in a North–South context. Future research should particularly focus on North–South fossil fuel financial flows, which have received comparatively little attention. This article is categorized under: The Carbon Economy and Climate Mitigation > Decarbonizing Energy and/or Reducing Demand
The 2015 Paris Agreement on Climate Change implicitly calls for leaving 80% of coal, 50% of gas and 33% of oil reserves underground. This paper studies the scarcely addressed relationship between investors like pension funds and climate policy implementation by addressing the question: what is the extent of pension fund investments in the fossil fuel sector, what is the range of actions that pension funds take to address environmental issues, and what does this suggest about pension fund commitments to ambitious climate targets through leaving fossil fuels underground? A small sample of pension funds alone manages at least €79 billion in liquid fossil fuel assets, suggesting that OECD pension funds may jointly manage between €238-828 billion. Sustainability reports reveal that pension funds engage in five actions to implement climate policies: 1) divestment; 2) direct engagement; 3) carbon footprint calculations; 4) investing in 'green' alternatives; and 5) engaging in climateoriented coalitions. However, their use of these actions is so far ineffective and counterproductive to taming the fossil fuel sector. Pension funds are not fully committed to leaving fossil fuels underground, which de facto renders them not yet committed to meeting ambitious climate targets. Forthcoming policies must target investors like pension funds to improve the prospects of meeting such targets and protect vulnerable countries from inheriting the risks of stranded assets.
An under-researched story is how large shareholders (e.g. Pension Funds) and investors (e.g. Export Credit Agencies) whose investments in fossil fuels may amount to trillions of dollars are implementing the Paris Agreement on Climate Change and in particular leaving fossil fuels underground (LFFU). Hence, this paper addresses the question: What arguments are used by shareholders and investors in making their financial flows consistent with LFFU, and what do these arguments imply for: access to fulfilling needs; allocation of related resources, responsibilities and risks; and, the right to (sustainable) development? This paper identifies the different arguments used and clusters them into five investor/shareholder scenarios. It assesses these scenarios using the inclusive (access and allocation) development framework. We find that there is prima facie evidence that fossil fuels and associated infrastructure are doomed to become obsolete and hence stranded, which poses a series of risks for (potential) investors and various stakeholders. Three of the five identified scenarios indicate that Pension Funds and Export Credit Agencies may transfer their risks associated with fossil fuel resources, assets and/or related knowledge to developing countries justified by the latter’s Right to Development. Such transfers have negative access and allocation impacts—creating, inter alia, a fossil fuel infrastructure and path dependency in the South and amounting to a de facto transfer of a carbon budget along with carbon dependency and related debt to the Global South.
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