Climate Change Scenarios

Due to the complex interplay of climatic and socioeconomic systems, it is impossible to accurately predict the future, including the frequency, severity, impacts of climate hazards and the transition pathways. To address this inherent uncertainty in modeling climate-related macroeconomic and financial risks, TCFD recommends the adoption of scenario analysis to explore a range of plausible outcomes of climate change’s impacts on the financial system.

The selection of climate change scenarios determines the range of impacts expected. Various organizations, including the TCFD, IPCC, NGFS, and third-party vendors, provide climate scenarios that outline different pathways, from low-carbon transitions to high-emissions futures. Most of them are built around a global temperature target or emission pathways and follow four common pathways: (i) ambitious Paris Agreement-aligned action; (ii) delayed Paris Agreement-aligned action; (iii) current policy commitments; and (iv) business as usual.

Appendix A (reproduced below) of the landscape report by UNEP FI listed the most commonly used scenarios, namely, IPCC, IEA, and NGFS, as of December 2022. In this section, we focus on NGFS scenarios which are frequently used by central banks and financial supervisors (ref the ECB and Moroccan report). The NGFS provides a comprehensive suite of models, including data, scripts, tools, and detailed documentation. For users seeking more information, the NGFS technical documentation (ref.) and presentation (ref. here) offer further insights, including comparisons with IEA and IPCC scenarios."

Overview of Transition Scenarios

Scenario Provider	Name	Sector	Est. implied temp. rise	Basis
IEA World Energy Outlook (WEO) [updated annu- ally]	NZE2050 (Net-zero emissions by 2050)	Energy	1.5°C	Outlines the technology, policies, and behaviour change necessary to bring about net-zero emissions by 2050 and includes key energy related UN SDGs.
	SDS 2020 (Sustain- able Development Scenario)	Energy	1.8°C (66%) 1.5°C (50%)	Considers social (SDG) and climate goals
	STEPS (Stated Poli- cies Scenario)	Energy	Around~2.5°C	Accounts for stated policies and measures in place or under develop- ment in each sector (replaces the New Policies Scenario, NPS)
	APS (Announced Pledges Scenario)	All sectors	1.7°C	Assumes that governments will meet fully and on-time all climate-related commitments made, and includes related pledges made by the private sector and NGOs; does not achieve outcomes targeted in SDS 2020.
	Delayed Recovery Scenario (DRS)	Energy	<2.7°C	STEPS with a delayed recovery from pandemic
IEA Energy Technology Perspectives (ETP) [2020 release feeds into SDS scenario]	2DS (2 Degrees Scenario)	Energy	2°C	Rapid decarbonisation pathway in line with the Paris Agreement
	B2DS (Beyond 2 Degrees Scenario)	Energy	1.75°C	Includes the extent of clean energy technologies if pushed to their practical limits, in line with ambitious aspirations of the Paris Agreement
	RTS (Reference Technology Scenario)	Energy	2.75°C	Takes into account existing energy and climate-related pledges, including NDCs.
IPCC	RCP (Representa- tive Concentration Pathways)	All sectors	1.0°C (RCP 2.6) 1.8°C (RCP 4.5) 2.2°C (RCP 6.0) 3.7°C (RCP 8.5)	RCPs outline pathways according to different levels of radiative forcing in the CMIP5
IPCC	SR15	All sectors	1.5°C	Set of P1–4 pathways to meet 1.5°C target, building on RCP 1.9
IPCC	AR6	All sectors	1.6°C (SSP1– 1.9) 1.7°C (SSP1– 2.6) 2.0°C (SSP2– 4.5) 2.1°C (SSP3– 7.0) 2.4°C (SSP5– 8.5) (mid-term estimates 2041–2060)	Assesses results from the CMIP6 proj- ect in 5 SSP scenarios, with a broader range of GHG, land-use, air-pollutant futures than AR5, and accounts for solar activity and background forcing from volcanoes
NGFS	Orderly (NZ 2050 and Below 2°C)	All sectors	1.4°C (NZ 2050) 1.6°C (Below 2°C)	Transition Risks include policy reactions, technology change, CO2 removal, and regional policy variation. Both orderly and disorderly have alternate scenarios with limited or full CDR
	Disorderly (Diver- gent NZ and Delayed Transition)	All sectors	1.4°C (Diver- gent NZ) 1.6°C (Delayed Transition)	Higher transition risk than for Orderly scenario
	Hot-house World (NDCs and Current Policies)	All sectors	2.6°C (NDCs) 3°C+ (Current Policies)	Only current policies implemented, not NDCs, i.e. equivalent to IEA STEPS
OECM	One Climate Earth Model (OECM 1.0) OECM 2.0 (2022)	All sectors	1.5°C	1.5°C trajectory in 10 world regions without the continued use of fossil fuels Sectoral decarbonisation pathways and targets broken into Scope 1, 2, and 3 for industry sectors defined by CIGS standard
UNPRI Inev- itable Policy Response (IPR)	Forecast Policy Scenario	All sectors	1.8°C	Based on the anticipated policy response to meeting the Paris Agree- ment and subsequent impact on emissions reduction and temperature outcomes
	Forecast Policy Scenario + Nature	All sectors	Currently no agreed upon target for biodi- versity levels analogous to 1.5°C	Focused on climate policy trends and their interaction with land use, including nature-related policy action.
	Required Policy Scenario	All sectors	1.5°C	Current assessment of future policy developments needed to deliver 1.5°C outcome