Mr Thomas Tindall, Oxera. The extent to which we address climate change, and the way in which it may be achieved is highly uncertain, and intertwined with a wide-range of possible developments in socio-economic institutions, demographics, economic growth and consumer values. Scenario analysis is well equipped to deal with this uncertainty, and is being increasingly used to explore future pathways of combined social, economic and environmental systems.
From an investment perspective, understanding what we will consume, and what incentives will drive changes in consumption patterns and technology is key to evaluate how reductions in greenhouse gas emissions will affect specific companies and the consequences for investment strategy. Policy and incentive mechanisms causing behavioural change can have dramatically different profit implications between and within sectors, but are often neglected in long-run climate change scenarios.
This paper introduces a framework with which to understand the implications of behavioural change embodied within many global low-carbon scenarios. It provides a classification of future snapshots to highlight the extent of changes in production, technology and consumption. Alongside this we provide an analysis of the types of drivers of behavioural change. This is used to identify those drivers consistent with particular scenarios, and quantify the implications at a sector-level of emissions scenarios on behavioural change and ultimately investment returns.