Climate risk assessment of the sovereign bond portfolio of European Insurers

In the first collaboration between climate economists, climate financial risk modellers and financial regulators, we apply the CLIMAFIN framework described in Battiston at al. (2019) to provide a forward-looking climate transition risk assessment of the sovereign bonds’ portfolios of solo insurance companies in Europe. We consider a scenario of a disorderly introduction of climate policies that cannot be fully anticipated and priced in by investors. First, we analyse the shock on the market share and profitability of carbon-intensive and low-carbon activities under climate transition risk scenarios. Second, we define the climate risk management strategy under uncertainty for a risk averse investor that aims to minimise her largest losses. Third, we price the climate policies scenarios in the probability of default of the individual sovereign bonds and in the bonds’ climate spread. Finally, we estimate the largest gains/losses on the insurance companies’ portfolios conditioned to the climate scenarios. We find that the potential impact of a disorderly transition to low-carbon economy on insurers portfolios of sovereign bonds is moderate in terms of its magnitude. However, it is non-negligible in several scenarios. Thus, it should be regularly monitored and assessed given the importance of sovereign bonds in insurers’ investment portfolios

Impact of short-lived non-CO2 mitigation on carbon budgets for stabilizing global warming

Limiting global warming to any level requires limiting the total amount of CO2 emissions, or staying within a CO2 budget. Here we assess how emissions from short-lived non-CO2 species like methane, hydrofluorocarbons (HFCs), black-carbon, and sulphates influence these CO2 budgets. Our default case, which assumes mitigation in all sectors and of all gases, results in a CO2 budget between 2011–2100 of 340 PgC for a >66% chance of staying below 2°C, consistent with the assessment of the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Extreme variations of air-pollutant emissions from black-carbon and sulphates influence this budget by about ±5%. In the hypothetical case of no methane or HFCs mitigation—which is unlikely when CO2 is stringently reduced—the budgets would be much smaller (40% or up to 60%, respectively). However, assuming very stringent CH4 mitigation as a sensitivity case, CO2 budgets could be 25% higher. A limit on cumulative CO2 emissions remains critical for temperature targets. Even a 25% higher CO2 budget still means peaking global emissions in the next two decades, and achieving net zero CO2 emissions during the third quarter of the 21st century. The leverage we have to affect the CO2 budget by targeting non-CO2 diminishes strongly along with CO2 mitigation, because these are partly linked through economic and technological factors

Carbon lock-in through capital stock inertia associated with weak near-term climate policies

Stringent long-term climate targets necessitate a limit on cumulative emissions in this century for which sufficient policy signals are lacking. Using nine energy-economy models, we explore how policies pursued during the next two decades impact long-term transformation pathways towards stringent long-term climate targets. Less stringent near-term policies (i.e., those with larger emissions) consume more of the long-term cumulative emissions budget in the 2010–2030 period, which increases the likelihood of overshooting the budget and the urgency of reducing GHG emissions after 2030. Furthermore, the larger near-term GHG emissions associated with less stringent policies are generated primarily by additional coal-based electricity generation. Therefore, to be successful in meeting the long-term target despite near-term emissions reductions that are weaker than those implied by cost-optimal mitigation pathways, models must prematurely retire significant coal capacity while rapidly ramping up low-carbon technologies between 2030 and 2050 and remove large quantities of CO2 from the atmosphere in the latter half of the century. While increased energy efficiency lowers mitigation costs considerably, even with weak near-term policies, it does not substantially reduce the short-term reliance on coal electricity. However, increased energy efficiency does allow the energy system more flexibility in mitigating emissions and, thus, facilitates the post-2030 transition

Mid- and long-term climate projections for fragmented and delayed-action scenarios

This paper explores the climate consequences of “delayed near-term action” and “staged accession” scenarios for limiting warming below 2 °C. The stabilization of greenhouse gas concentrations at low levels requires a large-scale transformation of the energy system. Depending on policy choices, there are alternative pathways to reach this objective. An “optimal” path, as emerging from energy-economic modeling, implies immediate action with stringent emission reductions, while the currently proposed international policies translate into reduction delays and higher near-term emissions. In our delayed action scenarios, low stabilization levels need thus to be reached from comparatively high 2030 emission levels. Negative consequences are higher economic cost as explored in accompanying papers and significantly higher mid-term warming, as indicated by a rate of warming 50% higher by the 2040s. By contrast, both mid- and long-term warming are significantly higher in another class of scenarios of staged accession that lets some regions embark on emission reductions, while others follow later, with conservation of carbon-price pathways comparable to the optimal scenarios. Not only is mid-term warming higher in staged accession cases, but the probability to exceed 2 °C in the 21st century increases by a factor of 1.5

Replenishing the Indus Delta through multi-sector transformation

The Indus River Basin (IRB) is a severely water-stressed and rapidly developing home to an estimated 250 million people in South Asia. An acute deficit of environmental flows (EFs) in the basin’s delta negatively impacts geomorphology and surrounding ecosystems. Here, a sub-national model of the IRB’s integrated water–energy–land systems is applied to quantify multi-sector transformations and system costs for enhancing EFs to the Indus Delta. The results show that increasing the average outflows from the basin relative to historical policy levels by 2.5 and 5 times would increase sectoral costs for upstream water users between 17–32 and 68–72% for low and high ecological potential targets. The enhanced EFs result in more energy for pumping and treating water upstream from the delta and a net increase in irrigation and energy investments. The EF policy costs are minimized by 7–14% through cooperation across countries and 6–9% through the coordinated implementation of water efficiency measures in the irrigation, conveyance, power plant cooling, and water treatment sectors. The results underscore the crucial role of a multi-sector, multi-scale collaboration in achieving EF targets in water-stressed river basins for ecosystem adaptation to climate vulnerability, restoration of the delta, and socio-economic benefits

A multidimensional feasibility evaluation of low-carbon scenarios

Long-term mitigation scenarios developed by integrated assessment models underpin major aspects of recent IPCC reports and have been critical to identify the system transformations that are required to meet stringent climate goals. However, they have been criticized for proposing pathways that may prove challenging to implement in the real world and for failing to capture the social and institutional challenges of the transition. There is a growing interest to assess the feasibility of these scenarios, but past research has mostly focused on theoretical considerations. This paper proposes a novel and versatile multidimensional framework that allows evaluating and comparing decarbonization pathways by systematically quantifying feasibility concerns across geophysical, technological, economic, socio-cultural and institutional dimensions. This framework enables to assess the timing, disruptiveness and scale of feasibility concerns, and to identify trade-offs across different feasibility dimensions. As a first implementation of the proposed framework, we map the feasibility concerns of the IPCC 1.5 C Special Report scenarios. We select 24 quantitative indicators and propose feasibility thresholds based on insights from an extensive analysis of the literature and empirical data. Our framework is, however, flexible and allows evaluations based on different thresholds or aggregation rules. Our analyses show that institutional constraints, which are often not accounted for in scenarios, are key drivers of feasibility concerns. Moreover, we identify a clear intertemporal trade-off, with early mitigation being more disruptive but preventing higher and persistent feasibility concerns produced by postponed mitigation action later in the century

Household Cooking with Solid Fuels Contributes to Ambient PM2.5 Air Pollution and the Burden of Disease

Approximately 2.8 billion people cook with solid fuels, and research has focused on the health impacts of household exposures to fine particulate (PM2.5). Here, as part of the 2010 Global Burden of Disease project, we evaluate the impact of household cooking with solid fuels on regional ambient PM2.5 pollution. We estimated the proportion of ambient PM2.5 (APM2.5) from PM2.5-cooking for the years 1990, 2005, and 2010 in 176 countries, and use these to estimate ambient concentrations of PM2.5 attributable to household cooking with solid fuels (PM2.5-cooking). We used an energy supply-driven emissions model (GAINS) to calculate the fraction of total household PM2.5 emissions produced by cooking with solid fuels, by country. These findings were multiplied by the proportion of total APM2.5 attributable to household emissions, as calculated with the source-receptor model TM5-FASST, to obtain the proportion of total APM2.5 from PM2.5-cooking. In 2010, the proportion of APM2.5 from PM2.5-cooking ranged from 0% of total APM2.5 in six higher-income regions, to 44% (8 µg/m3 of 18 µg/m3 16 total) in Southern sub-Saharan Africa. PM2.5-cooking constituted >10% of APM2.5 in eight regions with 4 billion people, with a global mean of 14%. Globally, the mean population-weighted outdoor air pollution contribution of household cooking was 4 µg/m3 , with the highest contribution of 10 µg/m3 in South Asia. We conclude that PM2.5 emissions from household cooking constitute an important portion of APM2.5 concentrations in many regions, including India and China. Efforts to improve ambient air quality will be hindered if household cooking conditions are not addressed.JRC.H.2-Air and Climat

Introduction to the AMPERE model intercomparison studies on the economics of climate stabilization

[No abstract available

Fairness considerations in global mitigation investments

Despite overwhelming evidence that the world needs to make rapid and substantial investments in climate mitigation in this decade to meet the ambitious goals of the Paris Agreement, political and financial barriers continue to hinder mitigation efforts. Global mitigation investment pathways modeled in the sixth assessment report (AR6) of the Intergovernmental Panel on Climate Change (IPCC) reach global climate goals in a cost-effective manner. These are agnostic about who should finance these and how to fairly allocate costs and benefits of mitigation efforts. We apply equity considerations to global cost-effective mitigation investment needs and derive “fair-share” regional contributions, which describe the direction and magnitude of interregional financial flows that align with each consideration. We find that flows from North America and Europe to other regions would have to increase substantially relative to present levels to meet the Paris Agreement goals under most equity considerations

2°C and SDGs: United they stand, divided they fall?

The adoption of the Sustainable Development Goals (SDGs) and the new international climate treaty could put 2015 into the history books as a defining year for setting human development on a more sustainable pathway. The global climate policy and SDG agendas are highly interconnected: the way that the climate problem is addressed strongly affects the prospects of meeting numerous other SDGs and vice versa. Drawing on existing scenario results from a recent energy-economy-climate model inter-comparison project, this letter analyses these synergies and (risk) trade-offs of alternative 2 °C pathways across indicators relevant for energy-related SDGs and sustainable energy objectives. We find that limiting the availability of key mitigation technologies yields some co-benefits and decreases risks specific to these technologies but greatly increases many others. Fewer synergies and substantial trade-offs across SDGs are locked into the system for weak short-term climate policies that are broadly in line with current Intended Nationally Determined Contributions (INDCs), particularly when combined with constraints on technologies. Lowering energy demand growth is key to managing these trade-offs and creating synergies across multiple energy-related SD dimensions. We argue that SD considerations are central for choosing socially acceptable 2 °C pathways: the prospects of meeting other SDGs need not dwindle and can even be enhanced for some goals if appropriate climate policy choices are made. Progress on the climate policy and SDG agendas should therefore be tracked within a unified framework