The NGFS Scenarios have been developed to provide a common starting point for analysing climate risks to the economy and financial system. While developed primarily for use by central banks and supervisors they may also be useful to the broader private sector, government and academia.
In this second iteration, the NGFS scenarios have been brought up to date, including by incorporating countries’ commitments to reach net-zero emissions, and have been enriched with an expanded set of macroeconomic variables, country-level granularity, and an online portal through which users can explore the physical risks from climate change.
Reaching net zero CO2 emissions by 2050 on a global basis will require an ambitious transition across all sectors of the economy. The NGFS scenarios highlight a few important themes including rapid decarbonisation of electricity, increasing electrification, more efficient uses of resources, and a spectrum of new technologies to tackle remaining hard-to-abate emissions.
The impacts on the economy will be modest, and even positive depending on how smoothly the transition occurs. While stronger policy incentives will be needed to spur on the transition, new economic modelling in this release suggests that higher private and public investment in new technologies and sectors would offset impacts on both demand and supply.
However, it is prudent to assess a wide range of outcomes across different sectors and regions given the potential uncertainties. The NGFS scenarios also highlight the increased macro-financial risks that could crystallize in scenarios with divergent policies or delay followed by stronger action, and from physical risks.