carbonsink climate-related risks & scenario analysis · carbonsink carbonsink’s methodology...

Vincent Reulet – Head of Advisory Services

Carbonsink Climate-related

Risks &

Scenario Analysis

Carbonsink

Carbonsink’s Methodology

Case Study – Decarbonisation Scenarios Applied To Utilities

Applications of carbonvista

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AGENDA

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Conclusion & Take-aways

Q&A5

Expertise

Carbonsink is a highly specialized consultancy company focused on

the development of sustainability strategies and compensation of CO2

emissions.

Carbon

Management

Sustainability

Solutions

Carbon Finance

Climate Mitigation

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About Us

www.carbonsink.it

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Our Services

Financethe transition to

a zero-carbon

resilient economy

investing in climate

mitigation projects

Reduce

climate impacts

in line with

scienceAdvocate

for strong

policyframeworks

Measure

+ discloseclimate

impacts and risks

Tools:

CDP

guidelines

Science

Based

Target

Carbon

pricing

Carbon

finance

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Overall Carbonsink’s Approach

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Carbonsink’s

Methodology

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Aligned with internationally recognised standards

Integration within the business

Data review & theoretical scenarios modelling

Integration of financial KPIs – Realistic scenarios modelling

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Carbonsink’s Methodology

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Results5

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IPCC Scenarios

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QUALITATIVE

QUANTITATIVE

CLIMATE GENERAL

storylineQuantativescenarios

narrative scenarios

SRES & POST –

SRES SCENARIOS

Section 2.5

GENERAL MITIGATION SCENARIOS

Section 2.3

GENERAL FUTURES SCENARIOS

Section 2.4

EPA: rapid changing & slow changing the world

Beyond the limits:

CO2 emissions scenarios

Polestar: quantitative descriptions

TARGETS: climate scenarios for each Utopia

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Analogy With TCFD

Recommendations

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SBT Approach Towards Net-Zero

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Science Based Target –

Below 2 Degrees Scenario

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global

temperature

increase

1.5˚C

Reducing to

CO2 emissions

0 2050

By

Source: IPCC 1.5˚C report: Net zero emission 2050

How to limit to

Technology

Operations

– Assessment of actual

performances (vs. legislation &

peers)

– Feasibility of upcoming

technologies

R&D

– Assessment & integration of new

materials and/or technologies

Quality, Health & Safety

– Assessment & integration of new

materials and/or technologies

Finance

Finance

– Review of past and planned

CAPEX

– Incentive to drive toward a low-

carbon economy

Legal & Compliance

– EU ETS

– Fees associated to failure to

comply

Sales & Marketing

– Brand image

– Competitive advantage

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Relisation with Business Strategy

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INTEGRATION OF VARIOUS SYSTEM

Data Review & Scenario

Modelling

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Case Study –

Scenarios To

Drive

Decarbonisation

Applied To

Utilities

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• IEA 450• 31% renewable in energy mix by 2030

• IEA 2DS (2030)• 42% renewable in energy mix by 2030

• 57% renewable in energy mix by 2050

• 72% renewable in energy mix by 2060

• IRENA 2050• 66% renewable in energy mix

• 85% CO2 emissions annually for Power sector vs. 2015

International Climate-Related

Scenarios Related to Energy

Sector

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• EU 2030

• 43% CO2 emissions vs. 2005 for sectors within EU-

ETS

• 32% renewable in energy mix

• SEN 2030

• 28% renewable share in the energy mix

• Coal phase out by 2025

European & National

Decarbonization Scenarios

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EU Energy Mix Forecast

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SOURCE: A Clean Planet for all

A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy (28/11/2018)

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Net Zero by 2050

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Principal Assumptions

• Constant to slight

increased demand for

electricity: 340TWh in 2030 -Terna

• Increases in electricity

prices (due to cost of gas

and ETS)

• Role of CCGT still strategic

to respond to demand

• Installed capacity of

Renewable Energy

Business Plan

• 2021: Oil phase out

• 2025: Coal phase out

• Refurbishment of some old

CCGT

• Increase of Renewable (low)

• No consideration toward price of Storage

• Low Carbon Pricing bracket

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Assumptions made for

Business As Usual Scenario

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EU Energy Mix

Forecast

BUSINESS AS USUAL

CONSIDERATION

CLIMATE CHANGE

RELATED RISKS

VARIOUS

SCENARIOS

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Transition Risks

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POLICY &

LEGAL

TECHNOLOGY

MARKET REPUTATION

Technology

Risks

Decreasing cost of RES

generation technology

• Energy storage - 49%

since 2015

• Photovoltaic and

onshore wind -88%

and -69% since 2009

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Cost Of Storage

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Market

Risks

Implementation Market Stability Reserve in the

EU’s ETS in 2021

CO2 price to increase

8€ in 2008 vs.

28€ in 2019

RES to become cost-competitive vs CCGT

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Carbon Taxes

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2008 2018

Source: WORLD BANK, 2018

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EU ETS prices grapgh

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SOURCE: Carbon Tracker; Bloomberg

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Carbon Pricing Corridor for utility

sector

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Marginal Cost

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Disregarded

Carbon Capture & Storage:

→ Technology not cost effective

Revamp of CCGT plants

→ Already highly efficient (best in

class in EU), cost of €/tCO2

saved too high

Fuel switch (coal to gas)

→ High CAPEX and push-back

from investors

Simulated

Overall demand in Italy and

Electrification

→ Source taken from IEA and

Terna

Increase of Renewable

→ XX% per year up to 2050

→ Integration of storage cost

Upgrade of strategic sites to class

H

→ To improve CCGT efficiency

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Scenarios Taken In Consideration

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Application

Of The Tool

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carbonvista Concept

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SCENARIO

EU 2030 Energy Strategy

SEN 2030

IRENA 2050

IEA

EU ETS

SBTi

BUSINESS PLAN

CORPORATE STRATEGY

MATERIALITY ASSESSMENT

KPIs

REGULATIONS

GUIDELINES

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Live Dashboard To Track

Selected KPIs In Time

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Live Dashboard To Compare

Scenarios

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S C E N A R I O “ A S I S ” S C E N A R I O “ C O N N U O V O C C G T ”

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Dashboard Benchmarking With

International Scenarios &

Legislations

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Conclusion

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• Understanding of their climate situation

regarding Climate Change exposure

• Developed an approach shared with all

departments

• Define the more realistic scenarios taking in

account financial, technological and

policies constraints; not the “Perfect” one

• Learned to use the tool as an instrument in

order to embark the other departments

Results

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• A concrete tailor made approach

• Work with clients to define objects in order

to customize the tool (on going approach)

• Create a flexible approach that give the

opportunity to play with numbers

• Be consistent with the corporate climate

strategy, constant update and changes in

trends and methodologies

Conclusion

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• Consolidated with robust and trusted data

• Scalable

• Customisable

• Flexible

• Easy to understand and use

• Applicable to any industry sectors

• A tool that will seize the tangible aspects of your corporate complexity

Take-aways

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www.carbonsink.itinfo@carbonsink.it

Thank You.