Shared Socioeconomic Pathways (SSPs) are a set of scenarios that show the possible evolution of the world in the context of fundamental future uncertainties such as population, economic growth, urbanization, and educational attainment.
There exist five different narratives of SSP scenarios that represent alternative socio-economic developments, including sustainable development, middle of the road, rocky road, inequality, and fossil-fueled development over the next century, ending in 2100.
The increasing values from 1 to 5 are arbitrary but mainly identify perspectives of a future world differing in the amount of economic growth and the amount of climate-safe energy deployed, leading to varying amounts of CO2 emitted into the atmosphere each year.
SSP1 (Sustainabile development) represents a sustainable world with the word’s economy shifting towards a more environmentally friendly path. There is a growing commitment to development goals, which helps reduce inequality both between and within countries. Consumption patterns are shifting towards minimal material growth and reduced use of resources and energy.
SSP2 (Middle of the road) represents a world which continues along historical social, economic, and technological trends, with uneven development and income growth. Global and national efforts toward sustainable development make slow progress, and environmental degradation continues, though resource and energy use becomes somewhat more efficient. Population growth moderates and stabilizes later in the century. Income inequality remains or improves slowly, and challenges in addressing societal and environmental vulnerabilities persist.
SSP3 (Rocky road) represents a world where nationalism, competitiveness, and regional conflicts lead countries to focus more on domestic and regional issues, prioritizing national and regional security. This shift results in a focus on achieving energy and food security locally, often at the expense of broader development goals. Investments in education and technology decline, economic growth slows, and material-intensive consumption continues. Inequalities either persist or worsen, with low population growth in industrialized countries and high growth in developing ones. A lack of international emphasis on environmental issues leads to significant environmental degradation in some regions.
SSP4 (Inequality) represents a world where inequitable investments in education and disparities in economic and political power lead to growing inequalities both within and between countries. Over time, a divide emerges between a globally connected society engaged in advanced, knowledge-based industries and a fragmented, lower-income society focused on labor-intensive, low-tech work. Social cohesion declines, resulting in increased conflict and unrest. Technology advances significantly in high-tech sectors, while the global energy sector diversifies, investing in both carbon-intensive and low-carbon sources. Environmental policies primarily address local issues in middle and high-income areas.
SSP 5 (Fossil-fueled Development) represents a world where the reliance on competitive markets, innovation, and participatory societies drives rapid technological progress and the development of human capital for sustainable development. Global markets become more integrated, with strong investments in health, education, and institutions enhancing human and social capital. However, this economic and social push also involves exploiting fossil fuels and adopting resource-intensive lifestyles, leading to rapid global economic growth. The global population peaks and then declines during the 21st century. Local environmental issues, such as air pollution, are managed effectively, and there is confidence in the ability to manage social and ecological systems, potentially through geo-engineering.
The SSP scenarios consists of a set of baselines as well as mitigation scenarios. This is to investigate the implications of climate change impacts as well as the associated challenges for mitigation and adaptation. The mitigation scenarios were developed focusing on the forcing levels covered by the Representative Concentration Pathways (RCPs).
Representative Concentration Pathways (RCPs) are scenarios that model the level of radiative forcing that is caused by a given level of greenhouse gas concentrations. These scenarios are projection pathways and represent plausible greenhouse gas concentrations over time.
RCPs are constructed in a way that would result in a given amount of radiative forcing and were based on emissions scenarios. Thus, the numerical value of the RCP refers to this amount of radiative forcing in 2100.
SSP-RCP Framework
The SSP-RCP framework combines SSPs and RCPs in a Scenario Matrix Architecture. SSP and RCP scenarios are often combined in so-called Integrated Assessment Models (IAMs), which aim to capture key policy attributes, such as energy use, emissions and land use, considering the obstacles of mitigation and adaptation measures.
The result of the SSP-based emission scenarios without mitigation policy is at the high-end range of greenhouse gas concentrations of the RCPs by 2100. However, by adding assumptions about mitigation policies, each SSP can result in lower levels of radiative forcing. The mitigation needed to achieve a target radiative forcing will differ in each SSP depending on its mitigation challenges.
For example, the default Baseline XDC calculations utilizes SSP2-RCP6 data to project emissions and GVA. The SSP2 scenario represents the “Middle of the Road” pathway and assumes that current social, economic and technological trends continue through the 21st century. The greenhouse gas emissions associated with this scenario lead to radiative forcing of around 6 W/m2 and global mean temperature rise of around 3°C above the pre-industrial level.
SSP data and detailed research references can be found on https://tntcat.iiasa.ac.at/SspDb/dsd?Action=htmlpage&page=10#.
The International Energy Agency (IEA) has adopted hybrid modelling approach to study how the global energy sector can transition the net zero emissions scenario.
More specifically, the Net Zero Emissions (NZE) by 2050 scenario is designed for energy sector to achieve emission trajectories consistent with keeping the temperature rise in 2100 below 1.5°C (with at least 50% probability) with limited overshoot. The latest version of this scenario is used in in the XDC Model
World Energy Outlook 2023 – Analysis - IEA
Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach – Analysis - IEA
The main objective of this scenario is to show what is needed across the main sectors by various actors, and by when, for the global energy sector to reach net zero emissions of CO2 emissions by 2050 while meeting key energy-related UN sustainable development goals. IEA-NZE consists of key energy related sectors, namely, industry (chemicals, iron and steel ,cement, aluminum), transport (road, aviation, shipping), and building (residential, services).
Rapid and deep emissions reductions of both CO2 and other greenhouse gases (GHG) are needed by 2030 if we are to achieving net zero emissions by 2050. NZE Scenario reaches this by three times higher capacity in the renewables-based electricity generation as well as doubling the rate of energy intensity improvements, increasing electrification, and reducing three‑quarters of energy sector methane emissions. Thus if climate actions is delayed, much more CO2 need to be removed from the atmosphere after 2050.
NZE scenario is designed such that the global net zero CO2 emissions is achieved implementing net negative emissions in advanced economies, which allows residual gross emissions in emerging market and developing economies other than China.
When determining the sector a company belongs to, the NACE classification, i.e. Nomenclature statistique des Activités économiques dans la Communauté Européenne” (or Statistical Classification of Economic Activities in the European Community), is used. This the European standard system for classifying industries. It consists of several hierarchical levels that each of them includes an increasing detail of classification.
The first level is the broadest level of classification, consists of 21 alphabetically labelled codes (A to U), which identify an economic sector such as manufacturing and transport. Levels 2, 3, and 4 consist of divisions, groups, and classes, which respectively classify higher levels of granularity.
The XDC Model uses NACE codes to identify sectors and sector benchmark EEIs. Base year sector EEI (economic emission intensity) is derived from the median EEI of at least 30 companies in a given NACE code. If there are not enough company data for the highest granularity of NACE sector, a lower granularity NACE level is used.
The XDC Model to analyze the temperature alignment of companies focuses on Gross value added (GVA) as the indicator for value creation. GVA is defined as EBITDA plus Personnel Costs. More specifically, a company’s GVA is an equivalent metric to evaluate the contribution of a company to GDP, to be used in the construction of EEI pathways. GDP is an established metric to evaluate the economic growth in macroeconomic scale, i.e. global or national economies. The equivalent measure of macro-level GVA in company-level can be calculated as: GVA = Employee costs + Taxes net of subsidies (excluding those applied to products) + Profit. This can equivalently be written as: GVA = EBITDA + all personnel costs, for EBITDA being earnings before interest, taxes, depreciation, and amortization (see Refs. https://sciencebasedtargets.org/resources/files/Sectoral-Decarbonization-Approach-Report.pdf and https://sciencebasedtargets.org/resources/files/SBTi-Corporate-Manual.pdf).
For GVA calculation in base year, an internationalization is applied to consider the companies international operation. GVA is split into 3 sub-entities: the HQ country, HQ region, global trends. In each share, a purchasing power parity in USD (PPP$) conversion as well as an inflation adjustment are applied. When determining the company’s GVA projections to 2100, the GVA of each share is developing based on a chosen SSP scenario.
The gross value added (GVA) is the economic value of a company that is needed to calculate the base year Economic Emission Intensity (EEI) metric.
The XDC Climate Explorer allows companies to define their company-specific GVA for the years starting from the first year following the base year until 2030. When GVA growth assumption is given, emission growth curve is calculated based on the default Baseline EEI pathway, which is derived according to the SSP2-RCP6 scenario. Baseline emissions and GVA assumptions, i.e. SSP2-RCP6 scenario, are applied for any years up to 2100 when GVA growth is not specified.
The XDC Model considers the GHG emissions of a company when determining the Economic Emissions Intensity (EEI). More specifically, the emissions information is used in the numerator of the EEI metric, with the GVA of a company in the denominator. Both direct and indirect emissions are considered, which are categorized into three scopes comprising of additional sub-scopes. Unless stated, emissions data are obtained from Intercontinental Exchange (ICE) Sustainable Finance Data.
These three scopes of emissions are:
Scope 1 emissions are direct emissions from sources that are owned or controlled by the reporting company. Examples of these include emissions from the direct use of company facilities or company owned vehicles.
Scope 2 emissions are indirect emissions, which are a consequence of the activities of the reporting company, but occur at sources not owned or controlled by the reporting company. This is a result of the generation of purchased energy, which can include electricity, steam, heating and cooling for own use.
Scope 3 emissions are all indirect emissions, which are not included in Scope 2, that occur in the value chain of the reporting company, including both upstream and downstream emissions. Upstream emissions occur from activities such as fuel and energy related activities, business travel, and employee commutes. Downstream activities include emissions from leased assets, uses of sold products, transportation and distribution of goods.
In the XDC calculation, Scope 2 and Scope 3 emissions are currently considered with a factor of 50% in order avoid double counting. For emission projection, base year emissions are split following a similar internationalization approach as explained in the previous section: the HQ country, HQ region, global trends. When determining the company’s emissions projections to 2100, the emission of each share is developing based on a chosen SSP scenario.
Economic Emission Intensity (EEI)
XDC Model has a core logic which focuses on the decoupling of value creation from emissions. This is the same logic that underpins the European Green Deal as "a new growth strategy […] where economic growth is decoupled from resource use" (for further information, see The European Green Deal ).
The Economic Emission Intensity (EEI) is the quantitative metric used to calculate the XDC for companies. That is the quantity of GHG emissions the company needs to generate EUR 1 million in GVA adjusted for biases due to inflation and differences in purchasing power. EEI is calculation for each emissions scope.
Company Baseline EEI
Considering the emissions, an internationalization share (an additional calculation step, which considers a company’s operational trends split up into 3 sub-entities: the headquarter (HQ) country, HQ region, global) calculation is applied to each emission scope. A growth curve for emissions is calculated for each share of the emissions using the SSP2-RCP6 pathway as default calculation.
Similarly, for the GVA, an internationalization share (i.e. country, region, world) calculation is applied. Moreover, PPP$ conversion as well as inflation adjustment are applied on each share. Growth projections are then applied to each share of the GVA using the SSP2-RCP6 pathway as default calculation., and the shares are then summed over.
Finally, the EEI of a company is calculated as the ratio between the emissions and the the GVA for each emission scope from the base year to 2100.
Sector EEI
To determine the EEI for the sector in a given base year, the median EEI of the companies in the NACE sector is calculated after adjusting for biases due to inflation and differences in purchasing power.
Projecting the development of this EEI from the base year until the end year along the assumptions derived from a baseline and decarbonization pathways of a chosen scenario provider. The baseline trajectory of the sector is derived from the SSP2-RCP6 pathway in default calculation.
The sector decarbonization EEI pathway is a pathway with a global warming target considering mitigation capacities for different sectors. This is achieved by applying sector-specific decarbonisation assumptions e.g. International Energy Agency (IEA) scenarios. These are in line with the overall achievement of the 2°C or 1.5°C target for various industry groups at various points of time in the future.
Scenario EEI
The scenario assumptions for emissions are characterized according to the user’s specific climate strategies called measures. The users of the XDC Climate Explorer can examine the effect of implementing certain measures in a given year on their company’s climate impact. For measures planned before 2030, they should be defined such that they reach the reduction needed to stay below the budget of a 1.5 °C pathway.
Each measure changes the emissions of one or more emission scopes. The measure can involve a one-time (single-year) or a continuous change in emissions, given in absolute terms.
The change in emissions resulting from a measure implemented in a given year is applied to the company’s Baseline EEI, which are extrapolated with the assumptions inherent to SSP2-RCP6.0 up to 2100. Applying the emission change to the company’s Baseline EEI will provide the Scenario EEI. The implementation of measures and the resulting change in emissions result in a decoupling of GVA and emissions, constituting the Scenario EEI.
Company EEI Target
The company target EEI pathway provides the user of the XDC Climate Explorer with an EEI pathway that leads to 1.5 °C in 2100. There are two target EEI pathways given:
The X-Degree Compatibility (XDC) Model is an economic climate impact model, calculating the temperature alignment of an economic entity, such as a company, a building, a sovereign, or a portfolio. It analyses the degree of global warming that an economic entity is compatible with under various scenarios, answering the question: “How much warming could we expect if the entire world performed as well as this particular entity?” , with performance measured with respect to a sector-specific economic emissions intensity (EEI) benchmarks. Results are expressed in a tangible degree Celsius (°C) number: the XDC.
The XDC metric introduces the concept of performance, which compares the entity with the sector benchmarks. It can be treated as a universal criterion which maps the sector-specific data to the global scale through a normalization process, allowing the comparison to the sector specific benchmarks. The performance is the position of the entity’s EEI compared to the sector benchmarks. It is calculated for each year up to the end of century. The XDC model applies the same performance of a particular entity to the world, assuming the world GHG contributors perform similarly relative to their equivalent global benchmarks.
The entity’s EEI can be for example the default Baseline EEI or Scenario EEI, which would results in calculating, respectively, Baseline XDC and Scenario XDC.
The annual globally mapped emission data from will be passed to the (Finite Amplitude Impulse Response (FaIR) climate model (FAIR v1.3: a simple emissions-based impulse response and carbon cycle model , A modified impulse-response representation of the global near-surface air temperature and atmospheric concentration response to carbon dioxide emissions). The FaIR model calculates the global temperature resulting from the emissions from base year to 2100. Accordingly, the XDC value is the global mean temperature change in 2100 relative to the pre-industrial level.
By using global emission pathways for different GHGs and applying the XDC methodology, we can directly compare the XDC of an entity with the global temperature target (e.g., 1.5°C or 2°C). Thus, the metric enables the comparability of XDC values among different sectors. This feature provides the users of the XDC Model with XDC results which are easy to understand, communicate, and further use.
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The full documentation on the XDC-Model is only available via the XDC Academy for premium access users.