PwC Briefing: IPCC AR5 Synthesis Report - PwC UK blogs

PwC Briefing: IPCC AR5 Synthesis Report November 2014

What is the IPCC SYR? The IPCC* published the Synthesis Report (SYR) of the Fifth Assessment Report (AR5) on the 2nd November. This final section of the landmark report integrates the key points from the three working group reports released over the last year. The main messages in the Synthesis Report are bold and plain, even if familiar to many. Warming is unequivocal; human influence on the climate system is clear; climate change will amplify risks and threaten poverty reduction. Action to reduce emissions will slow economic growth by a mere 0.06% annually. Without it, average warming of 3.7-4.8°C is expected by 2100 bringing severe, irreversible impacts on natural systems and societies. The Synthesis Report is possibly the most important climate report published this decade. By catalysing action at the domestic and international level, particularly in Paris late next year, it is likely to have far-reaching implications.

Emphasis and nuances in the SPM The SYR has two sections, a Summary for Policy Makers and a longer report. We highlight seven points from the report in a table at the end of this note. The summary section condenses three 1000page volumes on science, impacts and adaptation, and mitigation, into 40 pages. So what’s in, what’s not and what’s been emphasised is significant as this is endorsed by all governments and will be most widely read. For example, while the 2°C carbon budget is highlighted in the summary, the contrast with the amount of carbon in fossil fuel reserves is stranded in the longer version and doesn’t make it into the summary. The report starts with blunt statements about the science: warming is unequivocal and our influence is clear. In other words climate change is not a matter of belief. It then outlines current and potential future impacts of climate change, taking care to explain which impacts are universally negative, and which are more ambiguous. Putting it mildly, it notes that there are five ‘reasons for concern’ each of which suggests impacts that are large and potentially irreversible, and costs that are significant. These include threats to unique systems such as coral reefs, extreme weather and large-scale singular events like the disintegration of the western Antarctic ice sheet which would raise sea level by 5 metres. The Synthesis Report is more than a copy-and-paste job, as the name suggests. The IPCC can also reach new conclusions by drawing together the findings from the three previous reports. In particular, it highlights how climate change amplifies other risks (to poverty alleviation, food production, and biodiversity etc.) and can even aggravate the risk of conflict and migration. It also emphasises the interaction between approaches to mitigation and adaptation, looking at how each complements the other rather than being substitutes in any decision-making process. While the report is clear about the science, it isn’t about the economics. A comparison is made between the costs of climate change impacts versus the costs of taking action. At the high level, the SYR makes the point that mitigation will be costly, but relatively low compared with the potentially high costs of impacts. It also notes that adaptation on its own is insufficient. But it has not synthesised the numbers. The SYR re-iterated the Working Group 3 findings that limiting warming to below 2oC would entail a (median of) 0.06 percentage points annual reduction in global consumption growth. This compares against projected growth of 1.6 – 3% a year in the baseline scenario. (This means if global consumption would have grown by 2% a year, it would grow instead at 1.94% a year when carbon mitigation costs are taken into account.) But the Synthesis Report does not compare the cost of impacts or of adaptation against economic growth in the way the cost of mitigation is. And the assumption in the baseline of long term growth of 1.6 – 3%, without mitigation,

doesn’t seem plausible or consistent with the ‘severe, widespread and irreversible impacts’ of a 4° world. There are other nuances in the Synthesis Report. The longer version, for example, contrasts the level of fossil carbon reserves with the 2oC carbon budget – the reserves are 4 to 7 times larger than the budget. But this point is omitted in the summary meaning that the ‘unburnable carbon’ argument doesn’t get such a high profile among busy policymakers. CCS is mentioned in the summary and table 2 in the summary shows the higher cost of mitigation without it, but its importance as a mitigation technology is only described in detail in the longer report. Perhaps the least satisfying aspect of the report is that global averages disguise the real local impact of the problem. Temperature change in some regions is expected to be much greater than average. Impacts on the poorest sections of all societies and poorest countries will be more significant than average. Even the cost of mitigation is likely to be much higher for some countries (the fossil fuel exporters) than the global average. Those interested in the regional variation can refer to the (excellent) CDKN AR5 toolkit to understand impacts on regions such as Africa, South Asia and Small Island Developing States (SIDS). The SPM ends with a strong emphasis that co-ordinated and ambitious action at the international, regional and national levels is required to tackle climate change. Whether policymakers will heed this advice will become clearer at the UN Climate Summit in Paris in December 2015. That is where world leaders have committed to agree an international deal to tackle climate change.

Relevance for business The Synthesis Report is likely to raise awareness and catalyse action on emissions and resilience in the business community. Weather or climate-sensitive businesses – from food and water to energy and infrastructure sectors – are unlikely to need a reminder of climate risks. But the discussion on the interaction between mitigation and adaptation is particularly relevant for business. This includes synergies with other objectives such as sustainable business development, resilience in supply chains, disaster risk reduction, co-benefits of mitigation solutions, and interactions with local communities. All these could help achieve a climate resilient business. The broad message is that integrated and holistic thinking is required when business leaders make their decisions. As would be expected the IPCC emphasised that emissions reduction is essential across every sector and geography. But in addition to consumption of fossil fuels, emissions from cement production and flaring get a specific mention. As a notable source of emissions, the cement sector and flaring are likely to be a particular focus for effort to reduce emissions. Key producing countries for coal and oil were also considered to be at risks of losing trade revenues under stringent mitigation policies, especially in the absence of CCS deployment. The role of financial institutions and the insurance sector is also discussed. They need to meet the investment need of low carbon technology development and deployment and can manage and transfer climate risks. The IPCC’s Summary for Policy Makers was not aimed directly at businesses, as its title suggests. But the implications for businesses are stark, as climate impacts and a low carbon transition span sectors as wide ranging as energy, technology, finance and agriculture. Companies that made pledges at the New York climate summit in September, are not debating the science, but are now asking hard questions about how to tackle the climate challenge.

Implications for Paris 2015 The IPCC SYR report tends to summarise and generalise issues at the global level, leaving few specifics for local and national government planners. There is some discussion for example, on different types of mitigation policies – for example an explicit mention of carbon pricing as a costeffective mechanism. Perhaps the most important advice in the report is on the need for integrated and holistic thinking among central and local government planners. The link required in decision

making on adaptation and mitigation responses is an important message. Both require technology development and deployment, both require finance, and both will require effective institutions and governance. There are also important synergies with other sustainable development goals (SDGs), so co-benefits and trade-offs need to be considered. The SDGs include ending poverty and hunger, ensuring access to affordable, reliable and modern energy. These are crucial in multi-faceted issues such as urbanisation planning, where planners need to consider growth alongside resilience and community impacts. The Synthesis report is essential reading for negotiators heading to the next climate summits in Lima and Paris. Countries preparing emissions targets as part of the pledges they make in the lead up to the Paris summit, need to understand whether their goals are aligned with the 2oC carbon budget. In the 2oC pathway, global emissions need to be 41-72% lower than 2010 levels by 2050, and virtually zero carbon by the end of the century. PwC has calculated in its recent Low Carbon Economy Index that this means that the major developed and emerging economies need to reduce their carbon intensity by over 6% each year on average. This implies a rapid decarbonisation of the electricity sector by 2030 as well as cuts in emissions from cement production and flaring. Other less dramatic emissions pathways are likely to lead to 3 or 4 degrees of warming and require greater investment in adaptation. National circumstances will no doubt drive which end of the spectrum the targets will be. But it is clear that the IPCC sets the stage for the climate negotiations over the next 13 months. How the leading actors respond will determine whether Paris is a success or failure.

* About the IPCC The Intergovernmental Panel on Climate Change (IPCC) is a panel of 195 governments. It was set up in 1988 to assess the state of knowledge related to climate change. While it does not conduct its own research it aims to provide policymakers with regular assessments of the scientific basis of climate change, its impacts and future risks, and options for adaptation and mitigation. Over 830 authors, typically government-nominated scientists, worked on Fifth Assessment Report (AR5). Review is an essential part of the IPCC process to ensure an objective, unbiased, transparent and comprehensive assessment of current scientific technical information. In particular governments reviewed and approved the Synthesis Report line by line before it was released.

Contacts PwC’s sustainability and climate change advisory team was established in 2007, and combines 700 experts globally, with over 100 in the UK. Specialists work with public and private sector clients. We focus on emerging issues of climate change policy, economics and development, sustainability/CSR strategy, supply chain, responsible investment, measurement, reporting and assurance. For more information see www.pwc.co.uk/sustainability. Get in touch below or read our blog.

Jonathan Grant

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Lit Ping Low

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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice, or an opinion on the science of climate change. You should not act upon the information contained in this publication without obtaining specific professional advice. Data used from third-party sources has not been independently verified or audited. Any third party views in this publication have not been edited or reviewed, nor is their inclusion an endorsement of them. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Seven points from the Synthesis Report

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The climate is changing and we’re influencing it Warming of the climate system is unequivocal, and rising anthropogenic emissions and atmospheric concentration of greenhouse gases are considered ‘extremely likely’ to have been the dominant cause of the observed warming. Driven by growth in global population and economic activities, global emissions growth is expected to persist leading to global mean surface temperature increases of 3.7 to 4.8°C by 2100. It is happening now … Evidence of observed climate-change impacts is strongest and most comprehensive for natural systems. In many regions, water resources are changing in terms of quantity and quality; many terrestrial, freshwater, and marine species have shifted their geographic ranges, seasonal activities, migration patterns. Studies shows that negative impacts of climate change on crop yields have been more common than positive impacts. Risks of extreme events such as heat waves, storm surges, and flooding are likely to have increased in some regions. … but current impacts are only the start Continued emission of greenhouse gases will cause further warming and long-lasting changes, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems. Surface temperature is projected to rise over the 21st century. It is very likely that heat waves will occur more often and last longer, and that extreme precipitation events will become more intense and frequent in many regions. The ocean will continue to warm and acidify, and global mean sea level to rise. Many aspects of climate change and associated impacts will continue for centuries, and the risks of abrupt or irreversible changes increase as the magnitude of the warming increases. Five ‘reasons for concerns’ were highlighted, which are unique and threatened systems, extreme weather events, distribution of impacts, global aggregate impacts and large scale singular events. Existing risks will be amplified, and impacts are uneven Overall climate change will amplify existing risks and create new risks for natural and human systems. Risks are unevenly distributed and are generally greater for disadvantaged people and communities. For example, in urban areas, climate change is projected to increase risks for people, assets, economies and ecosystems, including risks from heat stress, storms and extreme precipitation, inland and coastal flooding, landslides, air pollution, drought, water scarcity, sealevel rise, and storm surges. Rural areas are expected to experience major impacts on water availability and supply, food security, infrastructure, and agricultural incomes, including shifts in the production areas of food and non-food crops around the world The 2oC carbon budget is small relative to the estimated fossil carbon reserves The first Working Group report identified four Representative Concentration Pathways (RCPs) which describe pathways of GHG emissions and atmospheric concentrations. To meet RCP2.6 which is consistent with limiting warming below 2oC, the carbon budget between 2010 and 2100 is approximately 1000 GtCO2. Current annual emissions are around 50GtCO2, and the estimated total fossil carbon reserves are 4 to 7 times of this carbon budget. The mitigation pathways which are likely to limit warming to below 2°C would require substantial emissions reductions over the next few decades and near zero GHG emissions by the end of the century. Reducing emissions is expensive, but cheaper than rapid cuts later or adaptation Estimates of the aggregate economic costs of mitigation with a 2oC scenario suggest that baseline global consumption growth of 1.6 – 3% per year could be 0.06 percentage points lower. Delaying additional mitigation increases mitigation costs in the medium- to long-term. Without additional mitigation efforts, even with adaptation, warming by the end of the 21st century will lead to high to very high risk of severe, widespread, and irreversible impacts globally. Win-win solutions can reduce costs Significant co-benefits, synergies, and trade-offs exist between mitigation and adaptation and among different adaptation responses. Examples of actions with co-benefits include promoting energy and water efficiency, cleaner low-polluting energy sources, sustainable agriculture and forestry, and protection of ecosystems for carbon storage and other ecosystem services. There can also be potential adverse side-effects, for example on energy access, which can be avoided with the adoption of complementary policies.