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Unraveling the Pathways: Exploring the Role of Scenarios in Projecting Climate Futures

In: Corporate Finance Under Climate Crisis

Author

Listed:
  • Sandra Dow

    (Middlebury Institute of International Studies at Monterey)

  • Yuwei Shi

    (University of California at Santa Cruz)

Abstract

This chapter examines the essential role of scenario planning in addressing the climate crisis and helping firms manage the uncertainties of climate change. It examines key frameworks, including the IPCC’s Shared Socioeconomic Pathways (SSPs), Integrated Assessment Models (IAMs), the International Energy Agency’s (IEA) energy transition scenarios, and the Network for Greening the Financial System’s (NGFS) financial risk pathways. It also underscores the importance of Nationally Determined Contributions (NDCs) in shaping global climate action. These tools enable stakeholders to assess risks, identify opportunities, and formulate both mitigation and adaptation strategies. The case study of Air New Zealand demonstrates how scenario analysis informs strategic decision-making. The airline began with SSPs to identify broad socioeconomic risks and later integrated insights from the IEA and NGFS to address specific challenges. The scenario analysis illuminated pathways to net zero which the firm had pledged to undertake. These included adopting SAF (Sustainable Aviation Fuel), exploring carbon capture technology (CCS), and preparing for regulatory changes that could increase carbon-related costs. This example illustrates how businesses can use scenario-based planning to navigate the complexities of decarbonization while remaining adaptive to evolving market and policy conditions.

Suggested Citation

  • Sandra Dow & Yuwei Shi, 2025. "Unraveling the Pathways: Exploring the Role of Scenarios in Projecting Climate Futures," Springer Books, in: Corporate Finance Under Climate Crisis, chapter 0, pages 125-156, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-83487-5_6
    DOI: 10.1007/978-3-031-83487-5_6
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