The Group develops short, medium and long-term scenarios for the energy industry and for macroeconomic and financial conditions in order to support its strategic and industrial planning, the evaluation of investments and extraordinary corporate transactions.
The issues connected with future trends in climate variables (in terms of acute and chronic phenomena) define the so-called “physical scenario”, while the issues associated with the industrial and economic transition towards solutions to reduce atmospheric concentrations of CO2 are the characteristic elements of the “transition scenario”. The adoption of these scenarios and their integration into corporate processes takes account of the guidelines of the TCFD and enables the assessment of the risks and opportunities connected with climate change.
The physical climate scenario
Among the climate projections developed by the Intergovernmental Panel on Climate Change (IPCC) on a global scale, the Group has selected two representing a specific level of emissions (the so-called “Representative Concentration Pathway”):
- Representative Concentration Pathway 2.6 (RCP 2.6): compatible with global warming of less than 2 °C above pre-industrial levels by 2100, or an average of about 1 °C in 2081-2100;
- Representative Concentration Pathway 8.5 (RCP 8.5): compatible with a scenario where no particular measures are taken to combat climate change, a so-called “business as usual scenario”. In this scenario, a mean global temperature increase of about 4.3 °C above pre-industrial levels is forecast for 2081-2100.
In the RCP 8.5 climate projections, the Mediterranean and Central/South America will experience a significant increase in average temperatures and substantial decline in precipitation, with the effects becoming more pronounced in the second half of the century and the impact increasing up to 2100. In the RCP 2.6 scenario, the effects will be similar but less intense, with the trend slowing in the second half of the century, thereby producing a substantial differential between the two scenarios in 2100.
The transition scenario
The transition scenario depicts the evolution of industrial and business sectors in an economic, social and regulatory context consistent with different trends in greenhouse gas (GHG) emissions and, therefore, is correlated with the RCP 2.6 and 8.5 climate scenarios. The Group has therefore equipped itself with quantitative tools that incorporate assumptions regarding the context to produce corresponding projections for energy demand, electricity demand, electricity production, the penetration of renewables and electric vehicles, etc.: in short, all the variables that characterize a national energy system relevant to the Group’s activities. In defining the transition scenarios, we distinguish between:
- assumptions concerning the global macroeconomic and energy context in terms of commodity prices, interest rates, gross domestic product, etc., using international benchmarks produced by entities such as the International Energy Agency (IEA), Bloomberg New Energy Finance (BNEF), International Institute for Applied Systems Analysis (IIASA), etc.
- assumptions concerning local policies and regulatory measures associated with the fight against climate change, such as the reduction of carbon dioxide emissions, the efficiency of the energy system, the decarbonization of the electricity sector, the reduction of oil consumption, etc.