Economic Scenarios for Climate Change

Trusted scenarios to enable institutions to assess the types of risks posed by climate change.

Climate change will transform the world’s economies through rising sea levels, human health effects, heat effects on labor and agricultural productivity, changing tourism preferences and fluctuations in energy demand.

Moody’s Analytics produces trusted Climate Change scenarios to enable institutions to assess the types of risks posed by climate change. The trajectory for carbon dioxide emissions, the necessary policies to achieve these emissions and the corresponding change in global temperatures are all taken into account using our structural global economic forecast model which determines both physical and transition risks

We currently provide Climate Change economic scenarios that correspond to the Representative Concentration Pathways’s (RPC) increasing levels of greenhouse gas concentration:

  • RCP 2.6: Paris Agreement’s Target
  • RCP 4.5: Moderate Warming
  • RCP 6.0: Late Century Warming
  • RCP 8.5: No Mitigation

Availability

These initial Climate Change scenarios are available for 100+ countries with a forecast horizon through 2048 and become more severe in the second half of the century. Users can assess the risks within our Scenario Studio platform or download/automate delivery of forecasts through our Data Buffet service, within Excel using our Add-in or programmatically via an API.

Development Roadmap

We are also developing comprehensive climate change scenarios that take into account transition risk and acute physical risk. Scenarios will be produced for Tier 1 countries—U.S., U.K., Japan, France, Germany, Italy, China—across three sets of assumptions: A late transition to a low-carbon economy, an early transition, and no transition. These assumptions are consistent with anticipated regulatory scenarios to be released in 2021 by the Bank of England. The development timeline is as follows:

  • Aug 2020: U.S. Carbon Tax Scenario
  • Dec 2021: Comprehensive U.S. and U.K. Scenarios
  • Mar 2021: Comprehensive Climate Scenarios for Tier 1 countries (France, Germany, Italy, Japan, China)
  • May 2021: Comprehensive Climate Scenarios for Tier 2 countries (Canada, Mexico, Brazil, Indonesia, India, Saudi Arabia)
  • Jun 2021: Business Strategy Scenarios for Tier 1 & 2 countries

Methodology

Our economic modeling approach for developing climate scenarios shares some similarities with commonly used integrated assessment models (IAM). Integrated assessment models span across economics, climate science, energy, agriculture, water, physical science and healthcare. Each of these disciplines is expressed in terms of modules that are connected to describe how greenhouse gas emissions affect climate and how climate change affects the economy. The Moody’s Analytics global macroeconomic model uses information from IAMs as an input to account for the interdisciplinary nature of climate change scenarios. Such inputs include the link between emissions and temperature and the relationship between temperature and chronic physical risk factors such as the effect of heat stress on labor productivity.