Scenarios are non probabilistic pathways and projections built on assumptions. They represent imagined plausible futures and can be global or local, climate-related, socioeconomic or integrated, with or without policy dimensions. Businesses should stress test their strategy across different climate-related scenarios as part of the process of building capacity to incrementally adapt to ongoing climate-related change.
8 min read | Last updated 5 March 2021
Step 3 of the TCFD recommendations suggests that a business identifies and defines a range of scenarios. A scenario is either a projection describing a future state or a pathway describing the route to a future state. A business can custom-build scenarios for their own use from a mix of projections and pathways that are global and / or localised (ie global scenarios downscaled as far as possible to local levels) relating to the areas where they operate.
There are several generic types of climate-related scenario (see table below). Scenarios are the output data produced when assumptions (ie imaginary data) are run through models (mathematical engines). Output data are used as inputs to other climate models to produce next-level scenarios. For instance, representative concentration pathways (RCPs) are outputs of carbon models and inputs to climate models. Several types of scenarios can be integrated to build a richer imagined picture, eg RCPs and shared socioeconomic pathways (SSPs) can be integrated to produce mitigation scenarios.
Types of Climate-related Scenario
|Assumptions (Inputs)||Models (Calculations)||Scenarios (Outputs)|
|Population, economic activity, urbanisation, education, social equality, consumption patterns||Energy-economy and land use models||Energy, land use and emissions projections; shared socioeconomic pathway (SSPs) narratives|
|Emissions projections||Carbon cycle, atmospheric chemistry, atmospheric transport, and radiative transfer models||Representative concentration pathways (RCPs)|
|RCPs||Earth system models and climate models, both global climate models (GCMs) and downscaled regional climate models (RCMs)||Climate change projections|
|Climate change projections and elements of socioeconomic pathways||Various models relating to water, vegetation, agriculture, etc||Climate impact scenarios|
|SSPs and RCPs||Integrated assessment models (IAMs)||Mitigation scenarios|
Some well-known global climate-related scenarios are outlined below, followed by several New Zealand scenarios, including two integrated scenarios developed specifically for the New Zealand fishing industry. The more local the scenario, the more recognisable and relevant it will be to a business.
Representative Concentration Pathways (RCPs)
Climate scientists have developed a set of reference GHG concentration scenarios, known as Representative Concentration Pathways (RCPs), which describe plausible future pathways of GHG concentrations in the atmosphere. Each scenario is named after the level of radiative forcing that would result by 2100. For instance, RCP 2.6 means that GHGs in the atmosphere will reach a radiative forcing of +2.6 Wm-2 by 2100. There are many commonly used RCPs, such as RCP 4.5, RCP 6.0 and RCP 8.5.
Each RCP is derived from emissions projections and can be used to derive climate change projections. The relationships between four RCPs, cumulative emissions and global mean temperatures by 2100 are shown in the graph and table below.
|RCP||2100 Temp Anomaly||2100 Cumulative CO2 Emissions|
|2.6||<2C||3,000 Gt CO2|
|4.5||2.5C||4,500 Gt CO2|
|6.0||3C||>5,000 Gt CO2|
|8.5||4.5C||>7,500 Gt CO2|
Policy Inclusive Projections
Example: Climate Action Tracker makes global warming projections based on government policies in place around the world that are designed to reduce emissions. In the absence of policies, the baseline scenario, global warming would reach 4.1C to 4.8C above pre industrial levels by 2100. The most optimistic scenario, in which currently adopted national net zero emissions targets are reached, would result in global warming of about 2.1C above pre industrial levels by 2100.
Example: The International Energy Agency’s (IEA) World Energy Outlook report describes four plausible energy futures (IEA WEO, 2020).
|Stated Policies Scenario (STEPS)||Reflects all of today’s announced policy intentions and realisable targets; Covid-19 is brought under control and the global economy returns to pre-crisis levels in 2021|
|Delayed Recovery Scenario (DRS)||Has the same policy assumptions as STEPS, but a prolonged pandemic causes lasting economic damage, returning to pre-crisis size in 2023, and ushers in a decade of the lowest rate of energy demand growth since the 1930s|
|Sustainable Development Scenario (SDS)||Shares assumptions on public health and the economy with STEPS, and also assumes a surge in clean energy policies and investment, leading to full achievement of sustainable energy objectives, including the Paris Agreement, energy access and air quality goals|
|Net Zero Emissions by 2050 case (NZE2050)||Extends SDS and includes detailed IEA modelling of what would be needed in the 2020s to achieve net zero by 2050|
|SSP1 Sustainability – Taking the Green Road||Defined by low challenges to mitigation and adaptation; gradually increasing commitment to the SDGs; emphasis on economic growth for human well-being; global population peaks mid century; inequality is reduced across and within countries; low consumption and lower resource and energy intensity; strong, flexible institutions at global, regional and national levels|
|SSP2 Middle of the Road||Defined by medium challenges to mitigation and adaptation; current social, economic and technological trends continue; development and income growth proceeds unevenly across countries; global and national institutions progress slowly toward achieving the SDGs; environmental degradation continues with some improvements; overall the intensity of resource and energy use declines; global population growth is moderate and levels off in the second half of the century; income inequality persists|
|SSP3 Regional Rivalry – A Rocky Road||Defined by high challenges to mitigation and adaptation; resurgent nationalism and regional conflicts focus countries on domestic issues, particularly regional security issues; energy and food security goals are pursued within regions at the expense of broader-based development; investments in education and technological development decline; economic development is slow, consumption is material-intensive; inequalities persist; population growth is low in industrialised and high in developing countries; environmental concerns are a low international priority leading to strong environmental degradation in some regions|
|SSP4 Inequality – A Road Divided||Defined by low challenges to mitigation and high challenges to adaptation; highly unequal investments in human capital lead to increasing inequalities and stratification across and within countries, creating a widening gap between an internationally-connected society with knowledge- and capital-intensive sectors and fragmented lower-income, societies with labour intensive, low-tech economies; conflict and unrest are increasingly common. Technology development is high in the high-tech economy and sectors; investments in coal and oil, but also low-carbon energy sources; environmental policies focus on local issues|
|SSP5 Fossil-fueled Development – Taking the Highway||Defined by high challenges to mitigation and low challenges to adaptation; competitive markets, innovation and participation produce rapid technological progress and development of human capital toward the SDGs; global markets increasingly integrate; strong investments in health, education and institutions; exploitation of abundant fossil fuel resources fuels resource and energy intensive lifestyles worldwide leading to rapid growth of the global economy; global population peaks and declines in the 21st century; local environmental problems are successfully managed, including by geo-engineering|
New Zealand Scenarios
Example: A great starting point for any New Zealand business would be the six integrated scenarios for 2100 that were prepared for the Hīkina Whakatutuki New Zealand Ministry of Business, Innovation and Employment (MBIE) (Frame et al, 2018).
Following the IPCC scenario framework, a 3-dimensional approach that combines representative concentration pathways (RCPs), shared socioeconomic pathways (SSPs) and shared policy assumptions (SPAs), these six local scenarios integrate downscaled global climate change scenarios with country-relevant socioeconomic and policy assumptions.
|Regional context||Non-climate policy dimensions||Climate policy dimensions|
|The Pacific is a backwater economically, with low global trade, weak security, mounting refugees from Pacific Islands and regional conflict.||Tangible economic values are prioritized over intangible environmental and social values; water access rights are served through a first-come, first-served policy, with minimum flow regimes and water quality requirements given limited consideration; there are few market premiums for clean, green. Immigration is regulated by economic priorities.||Food production has limited consideration of environmental side-effects; adaptation is driven by short-term economic interests, with little attention paid to vulnerable groups or non-monetary values; transformational changes are avoided unless justified by short-term economic returns.|
|The Pacific is dominated by economic ascendancy through globalized trade; strong regional migration boosts the labour supply, and there is regional competition to attract business.||Mitigation is through weak global CO2 markets. No agricultural carbon charges; land-use decisions are made with a medium-term economic focus through markets; significant climate change focuses NZ on strategic adaptation to ensure its economic viability and retention of competitive advantages.||Tangible economic values are prioritized over intangible environmental and social values; water access rights are served by auctioning to the highest bidders, with limited protections for minimum flows and water quality; there are few premiums for clean, green; immigration is regulated by economic priorities.|
|The Pacific is an important global player due to its economic dominance. Technology, trade and economic migration are resulting in increasing homogenization of the region||NZ leads global mitigation through technological and policy innovation. It achieves CO2 neutrality early. Agricultural emissions are fully priced. Land-use decisions maximize economic growth. Adaptation minimizes economic risks. Transformations are facilitated by accounting for ecological services.||Environmental values are monetized in decision making; water access is auctioned, with protections; trade is dominated by the global market; domestic policies include advantages from the clean, green brand; immigration is regulated by economic priorities; there are variable discount rates.|
|Tthe Pacific is one of several competing trade blocs; countries in the region shift alliances to serve near-term interests; some countries are in severe poverty while others rapidly gain wealth.||NZ lags behind global mitigation through weak targets, minimal land-use change and exempting agriculture from carbon charges; adaptation is piecemeal and reactive; there is ad hoc transformation with little protection of vulnerable groups or environmental trade-offs.||There is strong prioritization of economic over environmental/social values; water access is driven to maximize land-based production; trade relationships are dominated by power blocs; clean, green premiums are ignored to prevent challenging the production paradigm; immigration is regulated by economic priorities; there is limited foresight on demographic issues; there are high discount rates; environmental conservation is a low priority.|
|The Pacific is part of an effective global trade regime that seeks competitive advantages based on a cheap and abundant labour force; the region is rapidly homogenized through near-universal new technologies and economic migration.||NZ meets global mitigation efforts by minimizing costs and exploiting opportunities from new technologies; land use remains livestock based, focused on productivity; adaptation is given little consideration; transformations are consistent with near-term economic metrics.||There is strategic protection of natural resources by sophisticated models; new technology reduces the focus on intrinsic environmental values; water rights are auctioned; there is a focus on economic efficiencies; livestock production is innovative; immigration is focused on economic benefit to recipient countries, not refugees; variable discount rates attract a global profile of environmental conservation.|
|The Pacific is part of an effective global trade regime through a growing service industry and niche products that support the sustainable use of local resources; migration policy balances economic drivers with protecting indigenous populations.||NZ leads global mitigation with CO2 neutrality by 2050 by reducing agricultural emissions through land-use change; adaptation is focused on land use and urban design, with high near-term and transitional costs; transformations are actively managed to protect the most vulnerable parts of society.||Preservation of natural resources and non-monetary values are consistent with a clean, green image; water rights are served by auctioning, with safeguards; effective trade is balanced with protection for indigenous property rights; there is a market premium for climate-friendly grass-fed livestock products and non-livestock land uses; immigration includes refugees; there are low social discount rates for strategic investments.|
Industry-Specific Integrated Scenarios
Example: Aotearoa Circle commissioned sector-specific scenarios for the fisheries and aquaculture sector in order to support strategic decision making and reduce barriers to effective risk management by stakeholders in the sector. Two integrated scenarios were developed based on global, regional, climate, energy and socioeconomic models (including several of those listed above). These were refined with stakeholders during workshop sessions (KPMG, 2020 (pdf)).
Both scenarios are set in 2050.
The first scenario, named Mako, is a storyline in which global warming is likely to exceed 4C by 2100.
The second scenario, named Kahawai, is a storyline in which the Paris Agreement has been achieved and global warming is likely to remain below 2C throughout the century.