In our climate-aware “Central Scenario” we assume a 30-year horizon and expect climate policies to be slowly introduced from 2025. However the implementation is likely to be muddled. Under such a scenario, the energy transition improvements will not be sufficient to meet the 1.5°C above pre-industrial levels goal, although we assume that global warming will stay below 2°C.
Economic implications: the impact on growth is marginal, while the erosion of household purchasing power by high carbon and energy prices (and overall higher inflation) will already be high in the next decade, particularly for high carbon users.
The “Alternative Scenario” models a potential lack of coordination between global institutions running mitigation policies that make it difficult to limit global warming to below 2°C. Ultimately, the transition to a Net Zero world would be delayed and the macroeconomic environment would worsen as the transition / physical risks increase significantly.
Economic implications: while the delay in green policy adoption will limit the impact on inflation, fragmentation and the speed of the process will introduce more uncertainty, penalising investments and therefore growth particularly for countries with higher emissions (China, India).
CENTRAL SCENARIO
ALTERNATIVE SCENARIO
Divergent schemes introduced for a more efficient and quicker phase out of oil, but at a higher costs. Lack of coordination among institutions worldwide. Policies insufficient to meet the 2°C target.
It incorporates some risk of delay. Slow introduction of climate policies starting from 2025, but proceeding in a muddled fashion. 1.5° C goal not reached, but limited to 2°C. Net Zero CO2 emission targets are not met by 2050.
It incorporates some risk of delay. Slow introduction of climate policies starting from 2025, but proceeding in a muddled fashion. 1.5° C goal not reached, but limited to 2°C. Net Zero CO2 emission targets are not met by 2050.
CENTRAL
SCENARIO
ALTERNATIVE
SCENARIO
Divergent schemes introduced for a more efficient and quicker phase out of oil, but at a higher costs. Lack of coordination among institutions worldwide. Policies insufficient to meet the 2°C target.
