Fossil Resource Markets and Climate Policy: Stranded Assets, Expectations and the Political Economy of Climate Change (FoReSee) – Distributional Effects and the Political Economy of Climate Policy

The Paris Agreement embodies the consensus over keeping global warming below 2°C, and aiming for 1.5°C. This target requires a radical transformation of the energy system. This will affect asset values, diminishing the value of fossil resources and long-lived capital stocks, and potentially turning these into stranded assets. Hence, the owners may oppose attempts to implement stringent policies. The resulting technological and political lock-in effects may impede climate change mitigation and a rapid global transformation of the energy sector.

The FoReSee (Fossil Resource Markets and Climate Policy: Stranded Assets, Expectations and the Political Economy of Climate Change) research project analyzes the interplay between policies to mitigate global climate change and the behavior of various participants in financial and fossil fuel markets. The main objective is to investigate how policies can be designed to overcome the inertia of the energy system and facilitate its transformation without excessive costs to society. FoReSee quantifies the redistribution of rents implied by various proposed climate policy instruments in sectors and countries vulnerable to asset stranding. It tries to understand private actors’ responses to current and expected, potentially uncertain, climate policies, and considers how climate policy design should take these responses into account. FoReSee puts emphasis on the interplay of actors, policies and information on fossil fuel and financial markets, while taking into account political economy and institutional constraints to effective climate change mitigation. In addition to traditional policy instruments, FoReSee investigates recently discussed supply- and demand-side climate policies and strives to suggest alternative instruments. The combination of empirical, numerical and applied theoretical modeling provides comprehensive guidance on appropriate and feasible policy design.
To ensure the applicability and relevance of its policy recommendations, FoReSee will engage in a multi-stakeholder dialogue with key players from the private sector (including firms in the energy sector and in finance/insurance), the public sector (including fossil fuel producing countries and European policymakers) and the academic community. Transdisciplinary workshops and bilateral consultations integrate stakeholders’ incentives, strategies, and modeling input and, thus, assure for the co-design and co-production of knowledge.
The results will be made available continuously over the project horizon in policy briefings, working papers, peer-reviewed academic journal articles, at international conferences and in integrative project workshops. The project will contribute to the education of junior researchers and actively engage with the national and international community of stakeholders and researchers in the economics of climate change.

Principal investigators
Eisenack, Klaus Prof. Dr. (Details) (Resource Economics)


Duration of project
Start date: 10/2018
End date: 09/2022

Hagen, Achim, Juan-Carlos Altamirano-Cabrera, and Hans-Peter Weikard. 2020. ‘National Political Pressure Groups and the Stability of International Environmental Agreements’. International Environmental Agreements: Politics, Law and Economics, December.

Hagen, Achim, and Klaus Eisenack. 2019. ‘Climate Clubs Versus Single Coalitions: The Ambition of International Environmental Agreements’. Climate Change Economics 10 (03): 1950011.

Kriegler, Elmar, Ramona Gulde, Arwen Colell, Christian von Hirschhausen, Jan C. Minx, Pao-Yu Oei, Paola Yanguas-Parra, et al. 2020. ‘Ausstieg aus fossilen Energieträgern - wie gelingt eine faire Systemtransformation’. Potsdam-Institut für Klimafolgenforschung.

Last updated on 2022-23-12 at 05:30