Chapter 7. Climate Models and Scenario Analysis Flashcards
What is a scenario analysis?
In its broadest sense, it’s the practice of planning through describing and sketching the future using plausible narrative stories (“scenarios”).
What is a climate scenario analysis?
It’s the use of climate scenarios for analysis and decision-making; it’s used to bolster corporate preparedness in the face of physical and transition-related climate impacts, communicate that preparedness to investors and other stakeholders, and guide strategy and investment decisions at all firms.
What are reference scenarios?
They are a set of standard, cross-comparable scenarios which are agreed-upon projections of global emissions trajectories, with accompanying socio-economic narratives and estimates for physical impacts.
According to the TCFD recommendations, what are the characteristics of the scenarios?
- Plausible
- Distinctive
- Consistent
- Relevant
- Challenging
What do organizations examine with scenario analysis for transition risk?
They examine whether their facilities, strategies, and portfolios align with one of the global projected emissions trajectories. Or the potential effects of climate policy tightening (e.g., a higher carbon tax) on their operations and plans.
What do organizations examine with scenario analysis for physical risk?
They examine emissions trajectories when “plugged in” to a physical climate model and allow for estimates of temperature rise, precipitation, weather extremes, and other phenomena.
What are stress tests?
Stress tests are forward-looking exercises that aim to evaluate the impact of severe but plausible adverse scenarios on the resilience of financial firms. They involve using models and data at the firm or systemwide level and may rely on historical or hypothetical scenarios.
What is a climate stress test?
A climate stress test is a forward-looking exercise designed to measure a financial institution’s exposure to climate risks, using scenario analysis, including severe climate risks, to assess the potential impact of climate change on the institution’s business model.
What are RCPs?
Representative Concentration Pathways (RCPs) are agreed-upon, projected, plausible emissions pathways through 2100 that represent different emissions projections under basic, plausible-economic, and social assumptions while staying within physical constraints. The RCPs are the base of current IPCC usage and modeling.
Why are the RCP names based on the amount of radiative forcing measured in watts/ meter squared (m2)?
The RCPs were constructed by back-calculating the number of emissions that would result in a given amount of radiative forcing—the difference between solar radiation (energy) absorbed by the Earth and energy radiated back into space—that would then result in a given amount of warming.
Which are the most widely used RCP models?
The most widely used models tend to be RCP 2.6 and RCP 8.5.
RCP 2.6 is a shorthand for reaching Paris goals (limiting warming to below 2°C) by drastically cutting emissions.
RCP 8.5, sometimes called “business as usual” and sometimes, confusingly enough, used as a “worst-case scenario,” is a scenario that assumes continued rising emissions, leading to much higher levels of warming.
What are SSPs?
Shared Socioeconomic Pathways (SSPs) provide plausible scenarios for how the world evolves in areas such as population, economic growth, education, level of globalization, level of urbanization, and the rate of technological development. They were developed subsequently to be used in conjunction with the RCPs.
Which are the five SSPs?
- SSP-1 sketches out a scenario with a significant focus on sustainability
- SSP-2 is a “business as usual” scenario
- SSP-3 involves regional rivalry between countries
- SSP-4 has a high degree of inequality
- SSP-5 posits fossil-fuel development
Which are the IEA’s two core scenarios?
The two core scenarios developed by the International Energy Agency (IEA) are:
1. Stated Policies Scenario, which reflects existing policy frameworks and announced policy intentions
2. Sustainable Development Scenario (SDS), which combines climate and social targets and limits warming to 2°C in line with Paris targets.
Which are the specific milestones defined in the Net zero Scenario?
- From 2021, the agency says there should be no new coal power plants, no new coal mines, and no new oil and gas exploration.
- By 2030, the world needs to achieve 60% of vehicle sales being electric, a phaseout of existing coal plants in developed economies, and over 1GW of additional solar and wind capacity needs to be added annually.
- By 2040, 50% of buildings must be retrofitted, and electricity generation emissions globally need to reach net zero.
