Climate models
Climate models are the core to assessing risk and valuation impact
Note: This is fairly complexed, we tried our best to explain it but if you have questions please reach out via our chat or website for any clarification you need.
Over the past few years, an international team of climate scientists, economists and energy systems modellers have built a range of new “pathways” that examine how global society, demographics and economics might change over the next century. They are collectively known as the “Shared Socioeconomic Pathways” (SSPs).
Consider them as different routes we can take that will all take us somewhere else. Every path has presumptions that correspond to a future path. At a high level the scenarios look like this :
Note for clarity, we will use the terms mitigation and adaptation. They mean:
Mitigation – reducing climate change – involves reducing the flow of heat-trapping greenhouse gases into the atmosphere,
Adaptation – adapting to life in a changing climate – involves adjusting to actual or expected future climate.
Both are necessary. There are frequently debates regarding the proportion of funding allocated to each entity.
The general format of the scenarios is:
- Region of the scenario - different groups of countries are mapped to different regions
- The Pathway - SSP1-5 as introduced above and we will discuss in detail below.
- The temperature target. In each scenario, the target temperature is 1,9, 2,5, 3,...6 degrees. Please note that although the goal of the Paris Agreement is to keep global warming below 2 degrees Celsius for this century, we do not have a path to 1.5 degrees Celsius. This is something we as a species must create.
- Model - Different models have different assumptions. We will go into this further shortly as well.
Regions
This is the regions that the models are applicable for.
Pathways
The scenarios pathways are:
- SSP1: Sustainability (Taking the Green Road)
- SSP2: Middle of the Road
- SSP3: Regional Rivalry (A Rocky Road)
- SSP4: Inequality (A Road divided)
- SSP5: Fossil-fueled Development (Taking the Highway)
It is best to think of them as narratives our paths on how the future unfolds. Because this is the future, it is incredibly difficult to forecast how it will develop, but we can have possible assumptions and theories, and as we progress, we can reference the paths against them. This is also critically why 15Rock integrates these pathways but also provides the first and most powerful scenario builder for you to explore your own pathways. We highly encourage you to share your pathways with the world.
SSP narratives
| SSP1 | Sustainability – Taking the Green Road (Low challenges to mitigation and adaptation) The world shifts gradually, but pervasively, toward a more sustainable path, emphasizing more inclusive development that respects perceived environmental boundaries. Management of the global commons slowly improves, educational and health investments accelerate the demographic transition, and the emphasis on economic growth shifts toward a broader emphasis on human well-being. Driven by an increasing commitment to achieving development goals, inequality is reduced both across and within countries. Consumption is oriented toward low material growth and lower resource and energy intensity. |
|---|---|
| SSP2 | Middle of the Road (Medium challenges to mitigation and adaptation) The world follows a path in which social, economic, and technological trends do not shift markedly from historical patterns. Development and income growth proceeds unevenly, with some countries making relatively good progress while others fall short of expectations. Global and national institutions work toward but make slow progress in achieving sustainable development goals. Environmental systems experience degradation, although there are some improvements and 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 or improves only slowly and challenges to reducing vulnerability to societal and environmental changes remain. |
| SSP3 | Regional Rivalry – A Rocky Road (High challenges to mitigation and adaptation) A resurgent nationalism, concerns about competitiveness and security, and regional conflicts push countries to increasingly focus on domestic or, at most, regional issues. Policies shift over time to become increasingly oriented toward national and regional security issues. Countries focus on achieving energy and food security goals within their own regions at the expense of broader-based development. Investments in education and technological development decline. Economic development is slow, consumption is material-intensive, and inequalities persist or worsen over time. Population growth is low in industrialized and high in developing countries. A low international priority for addressing environmental concerns leads to strong environmental degradation in some regions. |
| SSP4 | Inequality – A Road Divided (Low challenges to mitigation, high challenges to adaptation) Highly unequal investments in human capital, combined with increasing disparities in economic opportunity and political power, lead to increasing inequalities and stratification both across and within countries. Over time, a gap widens between an internationally-connected society that contributes to knowledge- and capital-intensive sectors of the global economy, and a fragmented collection of lower-income, poorly educated societies that work in a labor intensive, low-tech economy. Social cohesion degrades and conflict and unrest become increasingly common. Technology development is high in the high-tech economy and sectors. The globally connected energy sector diversifies, with investments in both carbon-intensive fuels like coal and unconventional oil, but also low-carbon energy sources. Environmental policies focus on local issues around middle and high income areas. |
| SSP5 | Fossil-fueled Development – Taking the Highway (High challenges to mitigation, low challenges to adaptation) This world places increasing faith in competitive markets, innovation and participatory societies to produce rapid technological progress and development of human capital as the path to sustainable development. Global markets are increasingly integrated. There are also strong investments in health, education, and institutions to enhance human and social capital. At the same time, the push for economic and social development is coupled with the exploitation of abundant fossil fuel resources and the adoption of resource and energy intensive lifestyles around the world. All these factors lead to rapid growth of the global economy, while global population peaks and declines in the 21st century. Local environmental problems like air pollution are successfully managed. There is faith in the ability to effectively manage social and ecological systems, including by geo-engineering if necessary. |
A challenge investors and policy makers have is to assess which path is more appropriate for a given situation and review it's implications.
A very interesting result of the modelling is despite the base model being developed by one model builder, the other models were ran with those same assumptions as well.
| Identifier | Descriptor | Marker Model (Institution) | Also computed by |
|---|---|---|---|
| SSP1 | Sustainability | IMAGE (PBL) | All |
| SSP2 | Middle-of-the-Road | MESSAGE-GLOBIOM (IIASA) | All |
| SSP3 | Regional Rivalry | AIM/CGE (NIES) | GCAM, IMAGE, MESSAGE-GLOBIOM |
| SSP4 | Inequality | GCAM (PNNL) | AIM/CGE |
| SSP5 | Fossil-fueled Development | REMIND-MAgPIE (PIK) | AIM/CGE, GCAM |
Here is a overview of the some of the assumptions behind the models:
| Category | Variable | SSP1 | SSP2 | SSP3 | SSP4 (High / Medium / Low Income ) | SSP5 |
|---|---|---|---|---|---|---|
| Socioeconomics | Population in 2100 | 6.9 billion | 9 billion | 12.7 billion | 0.9 billion / 2.0 billion / 6.4 billion | 7.4 billion |
| GDP per capita in 2100 | $46,306 | $33,307 | $12,092 | $123,244 / $30,937 / $7,388 | $83,496 | |
| Fossil Resources (Technological Change/Acceptance) | Coal | Med/Low | Med/Med | High/High | Med/Low / Med/Med / Med/High | High/High |
| Conventional Gas & Oil | Med/Med | Med/Med | Med/Med | High/Low / High/Low / High/Low | High/High | |
| Unconventional Oil | Low/Med | Med/Med | Med/Med | Med/Low / Med/Low / Med/Low | High/High | |
| Electricity (Technology Cost) | Nuclear | High | Med | High | Low /Low / Low | Med |
| Renewables | Low | Med | High | Low / Low / Low | Med | |
| CCS | High | Med | Med | Low / Low / Low | Low | |
| Fuel Preference | Renewables | High | Med | Med | High / High / High | Med |
| Traditional Biomass | Low | Low | High | Low / Low / High | Low | |
| Energy Demand (Service Demands) | Buildings | Low | Med | Low | High / Med / Low | High |
| Transportation | Low | Med | Low | High / Med / Low | High | |
| Industry | Low | Med | Low | High / Med / Low | High | |
| Agriculture & Land Use | Food Demand | High | Med | Low | High / Med / Low | High |
| Meat Demand | Low | Med | High | Med / Med / Med | High | |
| Productivity Growth | High | Med | Low | High / Med / Low | High | |
| Trade | Global | Global | Global | Regional / Regional / Local | Global | |
| SPA* Policy | Afforestation | Limited afforestation | No land policy | Afforestation / Limited afforestation / No land policy | Afforestation | |
| Pollutant Emissions | Emissions Factors | Low | Med | High | High / High / High | Low |
| Marker | Model | IMAGE | MESSAGE-GLOBIOM | AIM | GCAM | REMIND-MAGPIE |
| Reference | Van Vuuren et al. (2016) | Riahi et al. (2016) | Fujimori et al. (2016) | Calvin et al. (2016) | Kriegler et al. (2016) | |
| Challenges | Challenges to Mitigation | Low | Medium | High | Low | High |
| Challenges to Adaptation | Low | Medium | High | High | Low |
The energy assumptions are mapped to technology & SSP to either core, advanced (less expensive), or low (more expensive). Costs are assumed to be equal across regions; however, resource bases for renewable energy technologies differ across regions, leading to differences in deployment in the future.:
| Plant Type | SSP1 | SSP2 | SSP3 | SSP4 | SSP5 |
|---|---|---|---|---|---|
| Nuclear | LOW | CORE | LOW | ADV | CORE |
| Geothermal | ADV | CORE | LOW | ADV | CORE |
| PV | ADV | CORE | LOW | ADV | CORE |
| PV with storage | ADV | CORE | LOW | ADV | CORE |
| Rooftop PV | ADV | CORE | LOW | ADV | CORE |
| CSP | ADV | CORE | LOW | ADV | CORE |
| CSP with storage | ADV | CORE | LOW | ADV | CORE |
| Wind | ADV | CORE | LOW | ADV | CORE |
| Wind with storage | ADV | CORE | LOW | ADV | CORE |
There is also assumptions on change in energy costs every year for each pathway.
| Fuel | SSP1 | SSP2 | SSP3 | SSP4 | SSP5 |
|---|---|---|---|---|---|
| Coal | 0.50% | 0.50% | 1% | 0.50% | 2% |
| Gas | 0.50% | 0.50% | 0.50% | 1% | 2% |
| Conventional Oil | 0.50% | 0.50% | 0.50% | 1% | 2% |
| Unconventional Oil | 0% | 0.50% | 0.50% | 2% |
These assumptions are fairly high level and do not account for specific implementation costs within different regions and technologies.
Each model has it's own assumptions and it's critical to understand the assumptions when applying them to your investment process. For example, SSP3 assumes population continues to go linearly for the century while SSP5 assumes GDP growth accelerates. These various assumptions play a critical row in emissions and therefore the pricing of the climate risk.
SSP1 and SSP5 assume popular will peak to 8.5 Billion by 2050-2060 and then start to decline, while SSP2 and SSP4 assume population will peak to 9.5 Billion by 2070-2080. SSP3 models continued population growth to 12.6 by 2100.
These are done at a country/regional level and then processed.
Temperature
Once you have the SSP's accross different regions you can use the assumptions of the emissions released to understand the tempature impact. Each SSP and each model is also classified by the tempurate impact. The assumtions of each model are adjusted to reflect a possible tempurature outcome.
Different pathways have different temperature impact.
Models
The IAM used here, the “Global Change Assessment Model” (GCAM), represents both the behaviour of and interactions between primary and secondary energy supply and demand, the economy, water supply and demand, agricultural production, land use, and the climate – a system-wide perspective that includes both these intersectional connections, as well as a consistent representation of international trading and policy linkages and their evolution over 100 years under various scenarios.
The approach of the modeling represents many different groups independently creating models with different assumptions
The IAM models are:
- Global in scope
- Include representations of energy and agricultural/land use systems
- Include all anthropogenic sources of emissions
- Include some representation of the climate system
However, there is significant variation across models as to their:
- Spatial resolution
- Inclusion of gases and substances
- Energy system detail
- Representation of agriculture and land-use
- Economic assumptions
- Degree of foresight
- Sophistication of the earth system component
- Degree of integration of model components
(more info coming soon) until then please review model documentation at
UN IPCC - Mitigation Pathways Compatible with 1.5°C in the Context of Sustainable Development
Sources:
Updated about 2 months ago