The IPCC Fifth Assessment Report on Climate Change: Impacts for business

01 Oct 2013Archived News Climate Change Matters

The analysis and summary findings included within the IPCC Fifth Assessment Report (AR5) leaves little doubt that man-made climate change is a reality, and that impacts will be felt by businesses within their asset lifetime. Based on the projections, business should plan for a high emissions scenario and adopt a comprehensive risk management strategy that considers all impacts of climate change.

This article summarises the Report findings and looks at a number of ways the impacts may affect the long term sustainability of a business.

On 27 September 2013 the International Panel on Climate Change (IPCC) launched the IPCC Fifth Assessment Report (AR5) with the release of the Summary for Policy Makers. The full report is expected to be released electronically in January 2014. The peer-reviewed report is the most comprehensive analysis of the likely impacts of climate change to date. 

IPCC AR5 overview

The Fifth Assessment Report (AR5) is being released in four parts between September 2013 and November 2014. On the 27 September 2013 the “Summary for Policy Makers” document was released, providing an overview of the summary findings of the IPCC Working Group II. AR5 is the most significant assessment of scientific knowledge on climate change since the release of the IPCC Fourth Assessment Report (AR4) in 2007.

AR5 considers new evidence of climate change from 209 lead authors including the world’s foremost climate scientists from 39 countries. More than 600 additional contributors provided input, and it was reviewed by over 50 reviewers. AR5 is the most authoritative, peer reviewed report related to climate change science, global warming and future trends in the atmospheric-ocean system since its predecessor (the Fourth Assessment Report, AR4) was released. The outstanding finding of AR5 is the reduced uncertainty of the impacts of climate change.

The key points of AR5 reinforce the findings of the previous AR4 report and highlights the reduce uncertainty in these findings:

  • Warming of the climate system is unequivocal.

  • There is a 95% level of confidence that this warming is due to anthropogenic activities since the industrial revolution.

  • Atmospheric concentrations of greenhouse gases (CO2, CH4 and N2O) now substantially exceed the highest concentrations recorded in ice cores during the past 800,000 years.

  • Over the course of the last century the global mean sea level has risen by 0.19 metres. The rate of sea level rise per annum has grown to 3.2 mm per annum between 1993 and 2010.

The report also considers the likely impacts of further changes, including the increased propensity for extreme weather events.

According to the IPCC, within the early 21st century we are likely to see:

  • Fewer cold days and more frequent hot days over most land areas.

  • Increases in heavy precipitation events.

  • Increased incidence and/or magnitude of extreme high sea level events.

The impacts of climate change will become more pronounced

To assess the future impacts of climate change, the IPCC has developed four representative concentration pathway (RCP) scenarios:

  • RCP2.6 – the mitigation scenario.

  • RCP4.5 – the lower emissions stabilization scenario.

  • RCP6.0 – the higher emissions stabilization scenario.

  • RCP8.5 – the high emissions scenario.

The variances between the forecast increases in global mean surface temperatures and global mean warming between the best case policy scenario (RCP2.6) and worst case policy scenario (RCP8.5) are significant, and will impact on the frequency of climate change related events.

As demonstrated in the following figure, with strong mitigation action. the expected increase in global surface temperature ranges from a 1 o – 3o C increase by the end of the 21st century.

However, under the high emissions RCP scenario, by the end of the century, we are likely to see temperature increases between 4o – 11 o C.

Source: Summary for Policy Makers

As demonstrated in the figure below, the predicted mean rise in sea levels also varies greatly across the four RCP scenarios. Under the best case scenario (RCP2.6), the global mean sea level is likely to rise by 0.24m. This rises to 0.3m in the worst case scenario (RCP8.5).


What this means for business?

The summary findings and associated analysis included within AR5 leave little doubt that man-made climate change is happening and the impacts will be felt by businesses within their current asset lifetime.

The RCP scenario that is currently mostly closely aligned with the International Energy Agency’s projected emissions (as outlined in the World Energy Outlook 2012 business as usual scenario) is the high emissions scenario, RCP 8.5.

Based on current projections, business should plan for the high emissions scenario.

A risk managed approach

A comprehensive risk management strategy should consider all impacts of climate change, including options for mitigation of risks. The projected increase in warming and the resultant climate change impacts, may affect the sustainability of a business in a number of ways.

  • With increased warming, we can expect to see an increase in the number of extreme weather events, resulting in potential increased costs due to asset and infrastructure damages.

  • Disruption to supply chain reliability due to increased extreme weather events. Although these extreme events may not impact directly on your operation, it is important to consider the impacts on your suppliers or customers.

  • Significant increases in energy load associated with increased extreme temperature days are likely to have ramifications for the continued stability and security of energy supply.

  • Increased health and safety impacts on the workforce due to increase in warmer days and extreme weather events, leading to potential productivity losses.

A focus on adaptation?

Businesses that will be particularly susceptible to the impacts of climate change are those with supply chain assets located in coastal areas. Even a conservative estimate of projected warming will see over a 0.2 m sea level rise. In addition business’ that operate in, or supply to, areas susceptible to extreme weather events are likely to recognise the impacts of the projected temperature increase more immediately.

Risk management strategies should consider not only ways to mitigate risks, but how to best adapt operations to account for the anticipated change in climate (such as increased temperature and sea level). Comprehensive adaptation plans should focus on all areas relevant for the sustainability of a business – including how to manage rising costs; ensure continued and uninterrupted operations; build resilience along the supply chain; and manage employee health and safety.

The IPCC will be releasing their report Climate Change 2014: Impacts, Adaptation and Vulnerability in March 2014.

Shorter term implications

The AR5 report highlights increased certainty that the impacts of climate change have the potential to disrupt current business activities. The question remains whether this means that global or country emissions reductions targets will be revisited and/or reduced. Given current uncertainty relating to the Australian target under Direct Action, companies should adopt a risk position on the current reduction target and understand what the economic implications might be of Australia missing or reducing its target.

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