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

Особенности разработки термостабилизированных германиевых фотодиодов

Рассмотрены подходы к конструированию лавинных и нелавинных германиевых фотодиодов с применением эпитаксиальных структур и термоэлектрического охлаждения

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

Exploring Global Climate Policy Futures and Their Representation in Integrated Assessment Models

The Paris Agreement, adopted in 2015, paved the way for a new hybrid global climate governance architecture with both bottom‐up and top‐down elements. While governments can choose individual climate goals and actions, a global stocktake and a ratcheting‐up mechanism have been put in place with the overall aim to ensure that collective efforts will prevent increasing adverse impacts of climate change. Integrated assessment models show that current combined climate commitments and policies of national governments fall short of keeping global warming to 1.5 °C or 2 °C above preindustrial levels. Although major greenhouse gas emitters, such as China, the European Union, India, the United States under the Biden administration, and several other countries, have made new pledges to take more ambitious climate action, it is highly uncertain where global climate policy is heading. Scenarios in line with long‐term temperature targets typically assume a simplistic and hardly realistic level of harmonization of climate policies across countries. Against this backdrop, this article develops four archetypes for the further evolution of the global climate governance architecture and matches them with existing sets of scenarios developed by integrated assessment models. By these means, the article identifies knowledge gaps in the current scenario literature and discusses possible research avenues to explore the pre‐conditions for successful coordination of national policies towards achieving the long‐term target stipulated in the Paris Agreement

Exploring Global Climate Policy Futures and Their Representation in Integrated Assessment Models

The Paris Agreement, adopted in 2015, paved the way for a new hybrid global climate governance architecture with both bottom-up and top-down elements. While governments can choose individual climate goals and actions, a global stocktake and a ratcheting-up mechanism have been put in place with the overall aim to ensure that collective efforts will prevent increasing adverse impacts of climate change. Integrated assessment models show that current combined climate commitments and policies of national governments fall short of keeping global warming to 1.5 °C or 2 °C above preindustrial levels. Although major greenhouse gas emitters, such as China, the European Union, India, the United States under the Biden administration, and several other countries, have made new pledges to take more ambitious climate action, it is highly uncertain where global climate policy is heading. Scenarios in line with long-term temperature targets typically assume a simplistic and hardly realistic level of harmonization of climate policies across countries. Against this backdrop, this article develops four archetypes for the further evolution of the global climate governance architecture and matches them with existing sets of scenarios developed by integrated assessment models. By these means, the article identifies knowledge gaps in the current scenario literature and discusses possible research avenues to explore the pre-conditions for successful coordination of national policies towards achieving the long-term target stipulated in the Paris Agreement

Evaluating process-based integrated assessment models of climate change mitigation

Process-based integrated assessment models (IAMs) project long-term transformation path- ways in energy and land-use systems under what-if assumptions. IAM evaluation is necessary to improve the models’ usefulness as scientific tools applicable in the complex and contested domain of climate change mitigation. We contribute the first comprehensive synthesis of process-based IAM evaluation research, drawing on a wide range of examples across six different evaluation methods including historical simulations, stylised facts, and model diag- nostics. For each evaluation method, we identify progress and milestones to date, and draw out lessons learnt as well as challenges remaining. We find that each evaluation method has distinctive strengths, as well as constraints on its application. We use these insights to propose a systematic evaluation framework combining multiple methods to establish the appropriate- ness, interpretability, credibility, and relevance of process-based IAMs as useful scientific tools for informing climate policy. We also set out a programme of evaluation research to be mainstreamed both within and outside the IAM community

Energy system developments and investments in the decisive decade for the Paris Agreement goals

The Paris Agreement does not only stipulate to limit the global average temperature increase to well below 2 °C, it also calls for 'making finance flows consistent with a pathway towards low greenhouse gas emissions'. Consequently, there is an urgent need to understand the implications of climate targets for energy systems and quantify the associated investment requirements in the coming decade. A meaningful analysis must however consider the near-term mitigation requirements to avoid the overshoot of a temperature goal. It must also include the recently observed fast technological progress in key mitigation options. Here, we use a new and unique scenario ensemble that limit peak warming by construction and that stems from seven up-to-date integrated assessment models. This allows us to study the near-term implications of different limits to peak temperature increase under a consistent and up-to-date set of assumptions. We find that ambitious immediate action allows for limiting median warming outcomes to well below 2 °C in all models. By contrast, current nationally determined contributions for 2030 would add around 0.2 °C of peak warming, leading to an unavoidable transgression of 1.5 °C in all models, and 2 °C in some. In contrast to the incremental changes as foreseen by current plans, ambitious peak warming targets require decisive emission cuts until 2030, with the most substantial contribution to decarbonization coming from the power sector. Therefore, investments into low-carbon power generation need to increase beyond current levels to meet the Paris goals, especially for solar and wind technologies and related system enhancements for electricity transmission, distribution and storage. Estimates on absolute investment levels, up-scaling of other low-carbon power generation technologies and investment shares in less ambitious scenarios vary considerably across models. In scenarios limiting peak warming to below 2 °C, while coal is phased out quickly, oil and gas are still being used significantly until 2030, albeit at lower than current levels. This requires continued investments into existing oil and gas infrastructure, but investments into new fields in such scenarios might not be needed. The results show that credible and effective policy action is essential for ensuring efficient allocation of investments aligned with medium-term climate targets

Baseline projections for Latin America: base-year assumptions, key drivers and greenhouse emissions

This paper provides an overview of the base-year assumptions and baseline projections for the set of models participating in the LAMP and CLIMACAP projects. We present the range in baseline projections for Latin America, and identify key differences between model projections including how these projections compare to historic trends. We find relatively large differences across models in base year assumptions related to population, GDP, energy and CO2 emissions due to the use of different data sources, but also conclude that this does not influence the range of projections. We find that population and GDP projections across models span a broad range, comparable to the range represented by the set of Shared Socioeconomic Pathways (SSPs). Kaya-factor decomposition indicates that the set of baseline scenarios mirrors trends experienced over the past decades. Emissions in Latin America are projected to rise as a result of GDP and population growth and a minor shift in the energy mix toward fossil fuels. Most scenarios assume a somewhat higher GDP growth than historically observed and continued decline of population growth. Minor changes in energy intensity or energy mix are projected over the next few decades

Cost and attainability of meeting stringent climate targets without overshoot

Global emissions scenarios play a critical role in the assessment of strategies to mitigate climate change. The current scenarios, however, are criticized because they feature strategies with pronounced overshoot of the global temperature goal, requiring a long-term repair phase to draw temperatures down again through net-negative emissions. Some impacts might not be reversible. Hence, we explore a new set of net-zero CO2 emissions scenarios with limited overshoot. We show that upfront investments are needed in the near term for limiting temperature overshoot but that these would bring long-term economic gains. Our study further identifies alternative configurations of net-zero CO2 emissions systems and the roles of different sectors and regions for balancing sources and sinks. Even without net-negative emissions, CO2 removal is important for accelerating near-term reductions and for providing an anthropogenic sink that can offset the residual emissions in sectors that are hard to abate

Land-based implications of early climate actions without global net-negative emissions

Delaying climate mitigation action and allowing a temporary overshoot of temperature targets require large-scale carbon dioxide removal (CDR) in the second half of this century that may induce adverse side effects on land, food and ecosystems. Meanwhile, meeting climate goals without global net-negative emissions inevitably needs early and rapid emission reduction measures, which also brings challenges in the near term. Here we identify the implications for land-use and food systems of scenarios that do not depend on land-based CDR technologies. We find that early climate action has multiple benefits and trade-offs, and avoids the need for drastic (mitigation-induced) shifts in land use in the long term. Further long-term benefits are lower food prices, reduced risk of hunger and lower demand for irrigation water. Simultaneously, however, near-term mitigation pressures in the agriculture, forest and land-use sector and the required land area for energy crops increase, resulting in additional risk of food insecurity