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Scenario Analysis for Net Zero: The Applicability of Climate Neutrality Studies for Transitioning Firms in the German Building Sector and Energy-Intensive Industry

Author

Listed:
  • Fernanda Ballesteros
  • Franziska Schütze
  • Catherine Marchewitz
  • Alexandra Hüttel

Abstract

Various stakeholders are increasingly encouraging companies from the real economy to adopt measures facilitating their transition towards carbon neutrality. In this context, companies are expected to implement forward-looking strategies and climate-related reporting practices using scenario analysis aligned with scientific evidence and credible pathways to net zero carbon emissions. This paper examines the potential of scenario analysis as element for transitioning to net zero. We review and compare eight existing economy and sector level climate neutrality studies for Germany that were published between 2019 and 2021, analysing their respective applicability as a science-based reference scenario for companies to strengthen strategy development and forward-looking reporting practices. Using the logical framework approach, we assess relevant transition indicators like technologies, energy and resource efficiency, carbon pricing, and other steering instruments for the building and energy-intensive industry sectors. These indicators serve to measure progress towards climate neutrality and could be included as a crucial component in transition plans. We find that, although modelling approaches for the studies differ, they often converge on similar results that can partially be translated to indicators at the firm level and, thereby, may serve as reference scenario for their transition planning.

Suggested Citation

  • Fernanda Ballesteros & Franziska Schütze & Catherine Marchewitz & Alexandra Hüttel, 2023. "Scenario Analysis for Net Zero: The Applicability of Climate Neutrality Studies for Transitioning Firms in the German Building Sector and Energy-Intensive Industry," Discussion Papers of DIW Berlin 2048, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2048
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    References listed on IDEAS

    as
    1. Casey Clark, 2019. "Climate Change Scenario Analysis for Public Market Investors," Journal of Applied Corporate Finance, Morgan Stanley, vol. 31(2), pages 118-123, June.
    2. Sarah Lester & Karsten Neuhoff, 2009. "Policy targets: lessons for effective implementation of climate actions," Climate Policy, Taylor & Francis Journals, vol. 9(5), pages 464-480, September.
    3. Puja Singhal & Jan Stede, 2019. "Wärmemonitor 2018: Steigender Heizenergiebedarf, Sanierungsrate sollte höher sein," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 86(36), pages 619-628.
    4. Daniela Fietze & Mats Kröger & Thorsten Müller & Karsten Neuhoff, 2021. "Ein wirksames Klimaschutzgesetz braucht Frühindikatoren," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 88(41), pages 679-687.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Climate change; scenarios analysis; decarbonization; sustainability reporting; transition plans; sectoral pathways; building sector; energy-intensive industry sector;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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