Global | NGFS Short-Term Scenarios: Sharper Modelling, Some Old Narratives

Summary

NGFS’s new five-year climate scenarios help gauge near-term transition and physical risks, adding compound-hazard modelling and macro-financial feedbacks, but they retain some outdated narratives and overlook recent policy decoupling, limiting realism.

Key points

• Key points:
• The 2024–30 analysis includes four alternative paths plus a baseline: Highway to Paris, Sudden Wake-Up Call, Diverging Realities and Disasters & Policy Stagnation link policy choices, acute shocks and macro-financial outcomes.
• Methodological advances include compound-hazard bundles, cross-regional trade and finance spillovers across 46 countries and 50 sectors, and a framework tying climate shocks to business cycles.
• Relevance concerns: Highway to Paris—an orderly net-zero path—now looks unlikely. The scenarios assume policy unity across advanced economies, overlooking U.S. decoupling.
• Feedback-loop gaps: The modeling modules capture interactions between the real economy and the financial sector, but their partial integration mutes second-round effects on inflation and interest rates.

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