Emissions and Physical Climate Risk

On 27 and 28 April, Climate Futures and KLP, together with SSB, Miljødirektoratet and CICERO arranged Den Lille Store Utslippsdagen. The meeting gathered perspectives from research, finance and public management. Questions that were up for discussion were for instance: What challenges do we face that pose physical climate risk? How does the government respond to this? How does the financial market react to the changes that are happening?

Did you miss Den Lille Store Utslippsdagen? A recording of the event can be found here.

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The event lasted for two days, the first one moderated by the director of Bjerknes Centre for Climate Research, Kikki Kleiven. Research and physical climate risk were the main topics on the agenda. Day 2 was dedicated to finance, moderated by Kristin Halvorsen, director of CICERO. (Photo: Øyvind Paasche)

Which climate future we end up with depends on how much we can cut emissions in the next 10 years, Kleiven opened with. The Paris Agreement aims to limit global warming to 1.5 degrees compared to 1990. Today, this number is already 1.2 degrees, and we see that the goal is slipping away from us. Nevertheless, the IPCC shows us that we have many tools that can help us cut emissions. Increasing climate measures and more affordable renewable energy was emphasised as contributions to positive development and accelerating climate measures are, according to Kleiven, crucial for sustainable development.

Sufficient emission cuts will entail many different measures in all sectors, e.g. energy, agriculture and finance, which is exactly why an SFI like Climate Futures is important and relevant. Climate futures facilitates long-term cooperation between research and business which is necessary, both in terms of emission cuts and climate adaptation.

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Kikki Kleiven opened the first day of Den Lille Store Utslippsdagen. (Photo: Øyvind Paasche)

Emissions, Climate Risk and What is New in Research

The first day at KLP was dedicated to research. What is the status? Ben Sanderson from CICERO told us about how methane can contribute to emission cuts. However, reduced methane emissions cannot replace reducing CO2 because the two gases have different qualities – e.g. how long they stay in the atmosphere and how they affect changes in temperature on the planet.

Statistics Norway (SSB), which is also one of the partners in Climate Futures, was also represented at the event. Kristine Grimsrud talked about forest fires in the coastal heathlands in Norway and emphasised the importance of coordinated efforts to reduce the fire hazard. Norway’s emissions budget was presented by Nina Holmengen (Miljødirektoratet).

The first day of the seminar provided insight on the status of emission cuts in Norway, but what do we actually do to adapt to the changes that are coming? The government are supposed to plan for a high emission scenario, but are they successful? Guri Lowrie (Riksrevisjonen) presented their newest report on the government’s work on climate adaptation. The report heavily criticises the goverment’s effort so far. They conclude that their overview of risk of natural disasters in a future climate is lacking, and recommend that the departments cooperate better about the topic of climate adaptation.

Finally, Øyvind Paasche, Head of Innovation in Climate Futures and Head of NORCE Climate Department, gave a talk on physical climate risk. Risk is typically defined as the probability of something happening multiplied by the consequences one faces if it happens. Paasche mentions that opening up for an alternative way of looking at risk, namely risk as a result of uncertainty associated with a set of events, can be important when we talk about risk related to climate. How do we then adapt to a world with increased uncertainty? Our actions the next 10 years are critical, and we must understand and truly consider the seriousness of the situation we are facing. We need available information and knowledge, and we must constantly stay up to date.

We are already noticing the consequences of climate change, and in 2021 alone we have experienced both “wind drought” in Europe and precipitation drought in Norway. These have contributed to an incipient “energy crisis”, and how does this affect the market? How does these kinds of events affect the sustainability goals and the paris agreement? The seasonal forecasts from Climate Futures can deliver necessary information and knowledge that can contribute to adaptation in a changing world. These forecasts fill a void, from 10 days to 10 years ahead, and can be a very useful tool for our partners within agriculture, aquaculture, shipping, society and energy.

You can follow and subscribe to our forecasts on klimavarsling.no

What Happens in Practice? Examples from the Business World

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Alexandra Paltschik Rønneberg, KLP (Photo: Øyvind Paasche)

Kristin Halvorsen (CICER) moderated day two, which mainly focused on practice and finance. Alexandra Paltschik Rønneberg (KLP) gave a presentation on how companies like KLP can know that their investments actually contribute to global emission cuts. She emphasised different methods, and among other things mentioned a tool that KLP has developed called The Road to Paris, which will help them invest in accordance with the Paris Agreement. The question they try to answer is how can KLP as an investor know that they are contributing to achieving the emission targets? It is largely a matter of finding out how much of their investments is in line with the Paris Agreement, and work to bring this coverage ration as close to 100% as possible. To achieve this, Rønneberg particularly points to access to data and openness in the financial industry as crucial factors.

Next, Kristian Ruth (Finans Norge) gave an introduction to how financial institutions can measure their financed emissions, meaning their emissions as a result of their investments. This is something they want to do because of future regulations, customers, and internal processes. Ruth mentions among other things that one method may be that the institutions are based on how much activity they have financed when calculating their share of emissions.

Einar Kilde Evensen (DNB) gave a presentation on financing to reach the climate goals, and he mentioned that even if investments in renewable energy are increasing, they are still only about half of the number invested in oil and gas. One of the reasons can be that the cost of investing in renewable energy is relatively high and quite uncertain. Nevertheless, the high electricity prices we have experienced i Norway and Europe the pas year can potentially make some of the projects related to renewable energy more profitable. The markets want to build more green energy production, but only when it is profitable will it be financed by the banks. This is why the finance sector is an important team player to achieve the green shift and reach the goals of the Paris Agreement.

Den Lille Store Utslippsdagen was concluded with a discussion about the future of investments in oil and gas. The Panel consisted of Håvard Gulbrandsen (KLP), Hilde Nordbø (Handelsbanken) and Ellen Bakken (Norsk olje og gass), and was led by Kristin Halvorsen (CICERO). The participants presented different perspectives on today’s investments in fossil energy, both nationally and globally, and whether this should be phased out in the near future. The transition to clean energy must take place quickly, and it will not be easy – but it is absolutely necessary.