In the context of energy transitions, what are "stranded assets"?

Stranded assets refer to investments in fossil fuel infrastructure that have lost value due to changes in market dynamics, regulatory environments, or shifts in consumer preferences, particularly stemming from the transition to renewable energy sources. As countries and regions make commitments to reduce carbon emissions and shift towards sustainable energy solutions, fossil fuel assets such as oil reserves, coal mines, and natural gas plants may become obsolete or face significant devaluation. The increasing emphasis on climate action and sustainable practices puts pressure on these assets, which may no longer be financially viable or align with future energy policies. Consequently, their potential to generate income diminishes, leading to financial losses for investors and significant implications for economies reliant on fossil fuel industries.

In contrast, assets that have increased in value, renewable energy infrastructure, and fully operational profitable assets do not fall into the category of stranded assets because they either continue to generate returns or are aligned with current market trends and future energy transitions.