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Climate change

OECD Workshop on Climate Transition Scenarios: integrating models into risk assessment under uncertainty and the cost of delayed action

6 July 2022
12h30-18h00 (CET)
OECD Paris
Hybrid Meeting

This workshop is the second of a series of workshops on Climate Science, Policy, Regulation and Practice. It will discuss key issues for financial supervisors, market participants and policy makers to use climate transition scenarios to assess climate risks, with a focus on the financial sector. It will gather climate modellers and economists, climate policy makers as well as representatives from central banks, financial supervisors, banks, asset managers, pension funds, insurers, data providers, civil society and academia, to foster knowledge sharing and dialogue on transition scenarios. The workshop will notably discuss modelling issues and assumptions associated with assessing the cost of a delayed transition, included linked to stranded assets. It will also discuss key issues to integrate climate transition scenarios and modelling into financial risk assessment.

The series of OECD workshops on Climate Science, Policy, Regulation and Practice aims to foster an outcome-oriented, interactivedialogue between climate modellers, scientists, financial regulators, supervisors, climate policy makers and industry practitioners to (i) explore the potential policy implications of a range of evidence relating to climate science and (ii) identify where scientific insights might help with emerging policy problems that require robust and pragmatic ways forward in the near term.

As a reminder, the first OECD Workshop on “Climate Change: Assumptions, Uncertainties and Surprises” was held on 3-4 September 2020 by the OECD Environment Directorate. It set the scene by highlighting key issues relevant to the design and use of climate research and science into policy, regulation and practice. It framed key issues economic and financial decision public and private actors need to know in order to interpret and use science and modelling in their approaches to climate risks, particularly physical and transition risks (e.g. to undertake climate stress tests and scenario analysis), and in their consistency assessments against mitigation and resilience. It discussed implications for financial regulators, industry practitioners as well as climate policy makers.

This upcoming 6 July 2022 virtual workshop will examine in more details key issues for financial supervisors, market participants and policy makers to use climate transition scenarios to assess climate risks under uncertainty. As a reminder, the workshop will gather climate modellers and economists, climate policy makers as well as representatives from central banks, financial supervisors, banks, asset managers, pension funds, insurers, data providers, civil society and academia. The workshop will be held back-to-back with the OECD Committee on Financial Markets (CMF). The workshop will also be open for Delegates to the OECD Working Party on Climate, Investment and Development (WPCID) and the Research Collaborative on Tracking Finance for Climate Action.

The workshop will be held as a virtual event (using Zoom Conferencing), under the Chatham House rule.

The team preparing the conference (climatedialogue@oecd.org), including Geraldine Ang (geraldine.ang@oecd.org) and Hubert Miller (hubert.miller@oecd.org), is at your disposal should you have any questions. To register, please contact climatedialogue@oecd.org.

This workshop is being hosted thanks to support from ADEME and Finance for Tomorrow in the context of the Finance Climact initiative, supported by a grant from the LIFE program.

Final Agenda

Opening Session - Brief welcoming remarks

  •  Alain de Serres, Acting Director, Environment Directorate, OECD
  • Valérie Quiniou-Ramus, Executive Director for Prospective and Research, ADEME (sponsor) 

Session 1: Transition scenarios: assumptions and modelling under uncertainty, and financial risks associated with delayed political action
This session will examine how delayed political support to the low-carbon transition could create macro-economic and financial risks. This session will provide an overview of relevant climate transition scenarios for the financial sector, such as the Network for Greening the Financial System (NGFS) Climate Scenarios for central banks and financial supervisors, which explore a range of plausible outcomes for how climate change (and associated physical risks) and policy and technology trends (and associated transition risks) could evolve in the future, in addition to the IEA scenarios. The session will notably discuss assumptions and modelling issues associated with developing transition scenarios under uncertainty. It will discuss the importance of macro-economic and policy choices, e.g. with regards to recycling tax revenues, double inflationary shocks and distributional impacts, as well as monetary policy. The session will also discuss the conditions needed to achieve carbon neutrality and price climate risks under uncertainty.

Moderator

  • Hugues Chenet, Scientific Collaborator, École Polytechnique; Honorary Senior Research Associate, UCL; Special Research Fellow, Japan FSA; and Research Associate, Chair on Energy & Prosperity 


Presentations

  • Stéphane Dees, Head of the Climate Economics Unit, Banque de France, and Annabelle De Gaye, Economist, Banque de France – Presentation of NGFS Climate Scenarios 
  • Baptiste Boitier, Economist, SEURECO – Implemention of NGFS Climate Scenarios in France with four multisectoral models, presentation of findings and limits 


Panellists

  • Laura Cozzi, Chief Energy Modeller, International Energy Agency (IEA) 
  • Frederic Ghersi, Economic Modeller, CIRED

Discussants

  • Hugues Chenet, Scientific Collaborator, École Polytechnique; Honorary Senior Research Associate, UCL; Special Research Fellow, Japan FSA; and Research Associate, Chair on Energy & Prosperity 


Session 2: The cost of a delayed transition: the central impact of stranded assets
This session will explore how the cost of a delayed and disordely transition may lead to a large amount of “stranded assets”, as a result of disruptive climate mitigation policy or technological innovations. The session will discuss the micro-economic implications of a delayed transition, both in terms of stranding of physical energy and other infrastructure assets, as well as their consequences in terms of financial, economic and social consequences, with  labour market frictions regarding skills, training and employability. The session will also explore the role of central banks in accounting for risks of stranded assets within a delayed transition scenario, and the macro-economic effects of the integration of stranded assets and their costs, which could create systemic risks to financial stability. The session will discuss transmission channels to the financial sector and the accumulation of macro-economic, credit, and financial valuation risks resulting from asset devaluation.

Moderator

  • Robert Patalano, Head of Financial Markets Division, OECD Directorate for Financial and Enterprise Affairs 

 Panellists

  • Jean-Francois Mercure, Senior Climate Economist, World Bank Group; Associate Professor in Climate Change Policy, Global Systems Institute, Department of Geography, University of Exeter, UK; and Research Fellow, Cambridge Centre for Energy, Environment and Natural Resource Governance (C-EENRG), Department of Land Economy, University of Cambridge, UK 
  • Laura Parisi, Team Leader, ECB Climate Change Centre 
  • Emanuele Campiglio, Associate Professor at the University of Bologna, Italy, and Scientist at the RFF-CMCC European Institute on Economics and the Environment

Discussants

  • Gael Callonnec, Economist, ADEME 
  • Russell Bishop, Principle Economist, European Bank for Reconstruction and Development 

Session 3: The way forward for climate risk management in the financial sector under uncertainty
This session will explore options for the financial sector to better manage climate risks under uncertainty, including through climate stress testing and climate scenario analysis. Additionally, the session will examine better integration of climate risks in market participants’ risk management practices and financial supervisors’ prudential assessments.

Moderator

  • Robert Patalano, Head of Financial Markets Division, OECD Directorate for Financial and Enterprise Affairs 

Keynote

  • Lars Peter Hansen, Director, Macro Finance Research Program, Beck Friedman Institute (BFI), University of Chicago, and David Rockefeller Distinguished Service Professor in Economics and Statistics, Booth School of Business, University of Chicago 


Panellists

  • Laurent Clerc, Director for Research and Risk Analysis, ACPR 
  • Irene Monasterolo, Professor of Climate Finance, EDHEC Business School, Visiting Senior Researcher, Vienna University of Economics and Business Administration 
  • Anuschka Hilke, Programme Director, Climate Finance and Investment, I4CE


Discussants

  • Mike Clark, Founder Director, Ario Advisory
  • Roger Pulwarty, Senior Scientist, National Oceanic and Atmospheric Administration (NOAA) Physcial Sciences Laboratory


Closing remarks

  • Alain de Serres, Acting Director, Environment Directorate, OECD

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