Nowadays, the increasing concentration of greenhouse gases influence Earth’s temperature and has led to a series of problems such as global warming and rising sea level. Therefore, governments around the world have set various targets and policies in order to reach the goal of decarbonization.
Climate Change Scenarios
What are climate change scenarios Climate change scenarios are projections of future greenhouse gas (GHG) emissions used by analysts to assess future vulnerability to climate change. Scenarios and pathways are created by scientists to survey any long term routes and explore the effectiveness of mitigation and helps us understand what the future may hold. Producing scenarios requires estimates of future population levels, economic activity, the structure of governance, social values, and patterns of technological change.
We can divide scenarios into two main categories: Exploratory and Normative. Exploratory climate change scenarios describe pathways of how to reach certain goals; it is used to assess potential climate-related risks and uncertainties. On the contrary, normative climate change scenarios are projections of what can happen by describing possible climate change futures; and it is used for setting of specific targets and implementation plans.
Why we use climate change scenarios
Climate change scenarios are particularly useful in:
Understanding climate change and allowing a better analysis different future states.
Charting response strategies in case of future shocks.
Supporting climate policy making.
Popular Climate Change scenarios
Different world institutions have raised scenarios describing possible future pathways. Here, we provide several most popular climate change scenarios raised by some world institutions or companies.
IEA (International Energy Agency) - related scenario
NGFS (Network for Greening the Financial System)
IPCC (Intergovernmental Panel on Climate Change) Emissions Scenarios
ETC (Energy Transitions Commission)
McKinsey’s Scenarios
World Energy Outlook – IEA scenarios
Let’s use IEA scenarios as an example, to have a detailed look at how these climate change scenarios actually look like.
Main climate scenarios
There are four main pathways assumed in the IEA scenario: Net Zero Emissions by 2050 Scenario, Announced Pledges Scenario and Stated Policies Scenario.
Assumptions
IEA scenarios make various macro and non-macro assumptions, covering fuel price, carbon dioxide emission and economic growth.
International fossil fuel prices (coal, gas, oil):
This varies across the scenarios, for example, in STEPS, is assumed that the demand of fossil fuel is still high, leading to higher prices; while in SDS we assume that Lower energy demand less need to produce fossil fuels. Also, the experts anticipated that the economic would recover in 2021, leading to high prices for energy and other commodities
Fuel end-user prices and electricity end-user prices:
Subsidy on fuel is reduced and carbon tax is introduced under this assumption.
Total CO2 emissions and prices:
Carbon pricing is established in all advanced economies and that carbon prices in these markets start to converge from 2025
Population growth and economic growth:
Population will grow by 0.7% per year on average at a slower rate compared with current level. The economy is assumed to grow by around 3% per year on average, converging to an annual long-term rate.
Strength and Limitations
Strength:
Scenarios are widely used and accepted by many energy companies.
Include sector and regional difference
A wide range of demand and supply components of all energy sources
Available information is fairly granular in relation to the production and demand for fossil fuel
Usually, annual updates are made to the scenarios to reflect changes in external environment
Limitations:
Does not try and anticipate technological breakthrough
Non-energy emissions are not included
Uses proprietary information (especially related to techno-economic assumptions), so harder to analyse and compare model assumptions
Prior to the creation of the NZE scenario in 2021, IEA scenarios were criticised for consistently underestimating the potential for renewables and expecting the persistence of fossil fuels
A limited range of climate outcomes is explored, without view as to the avoided climate impacts
References:
IEA World Energy Documentation October 2021: https://www.iea.org/reports/world-energy-outlook-2021
2020 TFCD Guidance on Scenario Analysis
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