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Climate Risk & Mitigation
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
October 6, 2020
Greater Washington Board of Trade
McKinsey & Company 2
Decisions made now will determine which emissions path we follow
1. 2005-2018 emissions from Global Carbon Budget 2019. Emissions from biotic feedbacks not included (e.g.: permafrost thawing, wildfires). 2. Average of the IEA WEO 2019 Current Policies Scenario and IPCC RCP8.5 pathway. 3. Reference case used is McKinsey’s Global Energy Perspective - Reference Case 2019) NB: Projected warming estimated by 2100
Pathways of global carbon dioxide emissions1
Gt CO2 per year
Source: Global Carbon Budget 2019, Global Energy Perspective – Reference Case 2019, McKinsey 1.5C Scenario Analysis; IPCC RCP8.5 IEA WEO 2019, expanded by Woods Hole Research Center
40
60
20202010 2030 2040 2050
20
0
2°C pathway
1.5°C pathway
Currenttrajectory3
Continued growth2
Yearly CO2 emissions surpass 70 Gt by 2050, leading to warming of ~5°C and severe physical climate impacts
A projection of current global energy trends still leads to warming of 3.5°C+
The significant effort required to reach a 1.5°C pathway would be challenging, yet feasible
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Extreme events are becoming more frequentNorthern Hemisphere Summer Temperature Anomalies
Number of observations, thousands
Standard deviations from mean of 1900-2015 period
A
~75xrisk
increase in
~50 years
-3 -2 -1 0 1 2 3 40
10
50
40
30
20
601961-1980
2011-2015
~15%
0.2%
Source: McKinsey & Company analysis, with advice from University of Oxford ECI, using methodology from Sippel et al. (2015) and CRU-TS data
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Drought frequency: Today % of decade in drought
Based on RCP 8.5
01-1011-2021-4041-6061-80>80
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Drought frequency: 2050
01-1011-2021-4041-6061-80>80
% of decade in drought
Based on RCP 8.5
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Risk of a lethal heatwave: 1998–2017
21-3011-20
≤ 2
41-5031-40
51-60>61
3-10
Based on RCP 8.5
Multi-model median (24 GCMs)Bias corrected with ERA-Interim observation reanalysis
Annual probability of a 3-dayheatwave exceeding 34°C wet-bulb
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Risk of a lethal heatwave: 2041–2060Annual probability of a 3-dayheatwave exceeding 34°C wet-bulb
21-3011-20
≤ 2
41-5031-40
51-60>61
3-10
Based on RCP 8.5
Multi-model median (24 GCMs)Bias corrected with ERA-Interim observation reanalysis
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DC infrastructure and real estate at increasing risk of floodingExample of “1 in 100 years” flood map for DC area from today to 2050
Source: US Energy Information Administration & First Street Foundation
Electric substationsMetro stations
Today 2050
The number of properties in D.C. at risk of flooding, will
increase by up to
26% by 2050
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How can DC keeps its cool in a warming world?
Based on RCP 8.5
Heat-related deaths in DC metropolitan
area are projected to
increase from ~250 today to
1200 –3500
annual deaths by 2100
Source: Woods Hole Research Center, based on RCP 8.5
Change in extreme heat days1, changes in # days 0 3 6 9 12 15
1. defined as days with wet bulb temperatures above 34C (93F). Under these conditions, a healthy, well-hydrated human being resting in the shade would see core body temperatures rise to lethal levels after roughly 4–5 hours of exposure.
Source: McKinsey Global Institute, ‘Climate risk and response: Physical hazards and socioeconomic impact’, January 2020, Wood s Hole Research Center and Shindell, D., Zhang, Y., Scott, M., Ru, M., Stark, K., & Ebi, K. L. (2020). The effects of heat exposure on human mortality throughout the United States. GeoHealth
Today 2030 2050
DC
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By 2030, we expect significant impacts across 5 systems
Livability and workability
Physical assets
Food systems Infrastructure services
Natural capital
250M-360M
People living in areas with a 9% annual probability of
lethal heat waves1
2x
Capital stock that could be damaged from riverine flooding by 2030, vs. today
2x
Increased risk of a >15%
global grain yield declinein a given year, vs. today
~30%
Of the earth’s land area projected to experience
biome shift, impacting ecosystem services, local livelihoods, and species’ habitat
Source: McKinsey Global Institute, 'Climate risk and response: Physical hazards and socioeconomic impacts', January 2020
Based on RCP 8.5
1. Defined based on experiencing a wet-bulb temperature of 35 degrees at which healthy, well-hydrated human beings resting in the shade would see body core temperatures rise to lethal levels after roughly five hours of exposure. Numbers are subject to uncertainty about aerosol levels and urban heat island effect.
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Global warming could accelerate as current trajectory risks triggering a number of feedbacks
Risk of climate feedback activation as a function of temperature increase
Collapse of Thermohaline Circulation
Collapse of ENSO Cycle
Dieback of the Amazon Rainforest
Dieback of the Boreal Forest
Collapse of West Antarctic Ice Sheet
Loss of Alpine Glaciers
Loss of Arctic Summer Sea Ice
Collapse of Greenland Glacier
Accelerated Permafrost Melt
Collapse of East Antarctic Ice Sheet
Loss of Arctic Winter Sea Ice
Global Mean Temperature Increase
8°C7°C6°C5°C4°C3°C2°C1°C
Risk of Feedback Activation
High
Medium
Low
Source: Steffan et al (2011), Frieler, K (2013), IPCC (2014), Robinson, Cavlov & Ganopolski (2012), Lenton, T. (2012) Levermann et al (2012), Rockstrom etl al (2018), Shellnhuber et al (2016); IPCC Assessment Report 5, Chapter 2; “Improvements in the GISTEMP uncertainty model” NASA GISTEMP and Lenssen et al.; McKinsey 1.5C Scenario Analysis
Climate System “Feed-back mech-anisms”
1.5°C pathway Current trajectory
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39
-10
40
0
10
20
30
50
20302010 2016 2018 2021 2050
0
Historical emissions 1.5C pathway emissions
2
Carbon dioxide emissions, Gt CO2
Remain within the carbon budget1 of
570 Gt CO2
reduction of emissionsby 2030
50-55%1
Emissions by 2050Net zero
4 Methane and Nitrous Oxide
are also steeply mitigated
1. 570 Gt of cumulative CO2 emissions from 2018 for a 66% chance of limiting global warming to 1.5°C by measuring the historical temperature increase by a mix of air and sea surface temperature
Source: McKinsey 1.5C Scenario Analysis; IPCC Special Report on 1.5C, Le Quéré et al. 2018
~41
An “orderly transition” to a 1.5C pathway would have four key features
3
The pathway to a 1.5C world
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There are 10 key requirements to stabilize the climate
Reduce demand Change how we power and fuel our lives
Scale up a ‘carbon management’ industry Tackle other GHG emissions
1 2 3 5
Scale carbon capture, utilization, and storage (CCUS)
6Develop markets for negative emissions
7Stop deforestation and implement reforestation and afforestation
8Reform agriculture and food systems
9Eliminate fugitive methane emissions
10
4
Source: McKinsey 1.5C Scenario Analysis
Reduce demand through process optimization, energy efficiency and “circular economy”
Electrify transport, industry, and buildings
Decarbonize the power sector faster than other sectors
Develop markets for bioenergy
Grow hydrogen market many times over
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Can the world pay attention to climate change in the middle of a global health crisis? We can’t afford not to.
Avoiding the worst impacts of climate change would require limiting warming to 1.5°C.
There are 10 requirements to stabilize the climate.
Key messages
A 1.5°C pathway is feasible, if the emissions curve is bent rapidly.
