From Nicolas Lancesseur,
• Provide guidance on how to conduct sensitivity analysis for key variables and assumptions underpinning scenarios.
This is highly related to the previous question. It is particularly important to increase clarity on the impact of choosing different approaches/models/assumptions including when choosing inputs from the NGFS or the IEA.
For instance, the NGFS is using three or four different models to generate its projections that can be used afterwards by the institutions in their risk assessment. Each model has its own functioning with different approaches in terms of technologies (some technologies are not an option in some models), negative emissions (the capacities to consider land use or CCS solutions is different across models), transition policies (some models are applying a uniform carbon price, others are able to implement emissions standards or subsidies), etc.
Depending on the risks an institution wants to anticipate, it should be able to take an informed decision when choosing the model - and underlying assumptions. The role of the regulators is therefore essential to provide (i) synthetical information to users who cannot be specialists of all the models and methodologies and (ii) “generic” sensitivity analyses for representative portfolios for instance.
More generally, another subject we wanted to mention is the choice made by the NGFS (and therefore all regulators referring to the NGFS) to not including a “business as usual” scenario in the “HotHouse world” family scenario. There is an intense debate in the scientific community around this kind of scenario, often associated to the RCP 8.5-like scenario from the IPCC, but we consider that this would be useful to reintegrate the possibility for institutions to calibrate their risk assessment also on this scenario. This is hard in a few lines to get into this highly technical issue, but we would be happy to further explore this point if needed.
krzmip
commented
2 years ago
From Nicolas Lancesseur, • Provide guidance on how to conduct sensitivity analysis for key variables and assumptions underpinning scenarios. This is highly related to the previous question. It is particularly important to increase clarity on the impact of choosing different approaches/models/assumptions including when choosing inputs from the NGFS or the IEA. For instance, the NGFS is using three or four different models to generate its projections that can be used afterwards by the institutions in their risk assessment. Each model has its own functioning with different approaches in terms of technologies (some technologies are not an option in some models), negative emissions (the capacities to consider land use or CCS solutions is different across models), transition policies (some models are applying a uniform carbon price, others are able to implement emissions standards or subsidies), etc. Depending on the risks an institution wants to anticipate, it should be able to take an informed decision when choosing the model - and underlying assumptions. The role of the regulators is therefore essential to provide (i) synthetical information to users who cannot be specialists of all the models and methodologies and (ii) “generic” sensitivity analyses for representative portfolios for instance. More generally, another subject we wanted to mention is the choice made by the NGFS (and therefore all regulators referring to the NGFS) to not including a “business as usual” scenario in the “HotHouse world” family scenario. There is an intense debate in the scientific community around this kind of scenario, often associated to the RCP 8.5-like scenario from the IPCC, but we consider that this would be useful to reintegrate the possibility for institutions to calibrate their risk assessment also on this scenario. This is hard in a few lines to get into this highly technical issue, but we would be happy to further explore this point if needed.