Abstract The transition towards a low-carbon economy is crucial to achieve the Paris climate goals, but it also presents the risk of stranded assets across various industries. However, existing research has mainly focused on upstream and power sectors, leaving the stranded asset risk of individual assets less understood. This study proposes a real options-based framework for evaluating the stranding risk of carbon-intensive assets. To illustrate its practical application, we apply the framework to a fossil-fuel-powered bulk carrier. The results show that under carbon pricing, the shipowner should expect to bear approximately US$26.5 million of stranded asset risk, which would decrease to US$25.2 million if the ship reduces speed to comply with carbon intensity regulations. We conclude that our framework will enable an adequate assessment of these risks, leading to more practical implications for investment decision-making and supporting climate risk management.
Stranded asset risk assessment on ship investments
2023-10-10
Article (Journal)
Electronic Resource
English
Bulk carrier , Gradient boosting regression tree , Least-squares Monte Carlo , Real options , Stranded assets , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>FC</mi></mrow></math> , Fuel consumption (mt) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>ME</mi></mrow></math> , Main engine output (kW) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>A</mi> <msub><mi>E</mi> <mi>p</mi></msub></mrow></math> , Auxiliary engine output in port (kW) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mrow><mi>AE</mi></mrow> <mi>s</mi></msub></mrow></math> , Auxiliary engine output in sailing (kW) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>SFOC</mi></mrow></math> , Specific fuel consumption of bunker (kg/kWh) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>V</mi> <mi>d</mi></msub></mrow></math> , Design speed (knot) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>V</mi> <mi>a</mi></msub></mrow></math> , Actual speed (knot) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>D</mi> <mi>p</mi></msub></mrow></math> , Days in port per voyage (day) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>D</mi> <mi>s</mi></msub></mrow></math> , Days in sailing per voyage (day) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>N</mi></mrow></math> , The number of voyages in a year , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>P</mi> <mrow><mi>fuel</mi></mrow></msub></mrow></math> , Price of bunker (US$/mt) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>C</mi> <mrow><mi>fuel</mi></mrow></msub></mrow></math> , Fuel consumption cost (US$) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>P</mi> <mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub> <mspace></mspace></mrow></msub></mrow></math> , Price of <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub></mrow></math> emissions (US$/t<math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub></mrow></math>) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>CE</mi></mrow></math> , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub></mrow></math> emissions (t<math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub></mrow></math>) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><msub><mi>C</mi> <mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub> <mspace></mspace></mrow></msub></mrow></math> , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>C</mi> <msub><mi>O</mi> <mn>2</mn></msub></mrow></math> emissions cost (US$) , <math xmlns="http://www.w3.org/1998/Math/MathML"><mrow><mi>EF</mi></mrow></math> , Emission factor for bunker
Oversubscribed ship investments and consequences
Online Contents | 1997
|Optimal portfolio choice for ship leasing investments
Taylor & Francis Verlag | 2019
|Adjacency Modeling for Coordination of Investments in Infrastructure Asset Management
Transportation Research Record | 2011
|IT spending: Automated asset tracking software tops list of IT investments
British Library Online Contents | 2008
Revision of German tax law - Consequences for ship investments
Online Contents | 1997
|