Stranded assets are fossil fuels which cannot be exploited to earn an economic return because of the shift toward a low-carbon economy. Africa is facing a situation where it may have to slow down or cease its mining activities altogether to comply with the Paris Agreement on low-carbon transition. The Agreement involves reducing the rate of carbon emissions to the atmosphere and achieving a 1.5 to 2 degree Celsius limit to global warming. Africa is only beginning to set foot into the fossil fuel economy as many countries increase their oil production and more discoveries of oil, gas, and coal being made. In sub-Saharan Africa, over 115 billion oil barrels and over 21 trillion cubic meters of gas remain undiscovered but recoverable. The continent has always looked to fossil fuel discoveries as a way to power her economies and end poverty, so asset stranding is expected to have an impact on social and economic development. Nevertheless, the issue of climate change cannot be ignored as it is likely to cause more adverse effects than the stranding of fossil fuels.
Dear D –
Stranded assets are not only about economics, but political and social economy as well. The transition from fossil fuel economies is, however, not going to be an easy one. Africa will need new technologies to actualize the move, yet Africa lacks the relevant infrastructure and technology to join the green economy hub. Africa needs to take action to save its renewable energies which are being affected by climate change because more than half of Africa’s population relies on biomass energy as the main source of fuel. Even so, most of Africa still remains energy-poor, hence the need to move fast toward greater resource efficiency. This could be achieved through a renewable energy revolution. Countries can turn their attention to solar, wind, and biomass projects. Meanwhile, the African Development Bank had come up with ways to mitigate the risks of asset stranding by conducting studies on low- carbon regulatory options on mining in Nigeria and South Africa. It also sought to make funding more accessible to countries for implementation of the much-needed change.
For details on how the African Development Bank is striving to help the low-carbon transition, read the story at All Africa
What exactly is stranded assets?