Climate scenario projections of macroeconomic variables

The heart of our modelling approach is the projections of macroeconomic variables in NGFS’ and Oxford Economics’ climate scenarios: We use a) scenarios of GDP and inflation to project financials based on the coefficients of the regression models, b) projections of carbon emissions and taxes to calculate the cost of carbon, and c) interest rate projections as risk factors for the discount rates in our asset pricing models.

We compare the projections of these variables in each of NGFS’ and Oxford Economics’ scenarios. For NGFS, we use the projections of the REMIND-MAgPIE integrated assessment model (short Remind), which are similar to the projections of Oxford Economics. As an example, we show projections for the United States, which represent patterns similar to those of other major economies.