Energy Policy xxx (xxxx) xxx

Contents lists available at ScienceDirect

Energy Policy
journal homepage: www.elsevier.com/locate/enpol

Deep decarbonisation pathways of the energy system in times of

unprecedented uncertainty in the energy sector
Evangelos Panos a, *, James Glynn b, Socrates Kypreos a, Antti Lehtilä c, Xiufeng Yue d,
Brian Ó Gallachóir e, f, David Daniels g, Hancheng Dai h
a
Laboratory for Energy Systems Analysis, Paul Scherrer Institute, Switzerland
b
Center on Global Energy Policy (CGEP), School of International and Public Affairs (SIPA), Columbia University, USA
c
VTT Technical Research Centre of Finland, Finland
d
School of Economics and Management, Dalian University of Technology, China
e
MaREI Centre for Energy Climate and Marine, Environmental Research Institute, University College Cork, Ireland
f
School of Engineering and Architecture, University College Cork, Ireland
g
VTI, Swedish National Road and Transport Research Institute, Sweden
h
College of Environmental Sciences and Engineering, Peking University, China

A R T I C L E I N F O A B S T R A C T

Keywords: Unprecedented investments in clean energy technology are required for a net-zero carbon energy system before
Integrated assessment modelling temperatures breach the Paris Agreement goals. By performing a Monte-Carlo Analysis with the detailed ETSAP-
Monte Carlo analysis TIAM Integrated Assessment Model and by generating 4000 scenarios of the world’s energy system, climate and
Net-zero GHG emissions pathways
economy, we find that the uncertainty surrounding technology costs, resource potentials, climate sensitivity and
Clean technology investment risks
Climate policy uncertainty
the level of decoupling between energy demands and economic growth influence the efficiency of climate pol­
Sector coupling icies and accentuate investment risks in clean energy technologies. Contrary to other studies relying on exploring
the uncertainty space via model intercomparison, we find that the CO2 emissions and CO2 prices vary convexly
and nonlinearly with the discount rate and climate sensitivity over time. Accounting for this uncertainty is
important for designing climate policies and carbon prices to accelerate the transition. In 70% of the scenarios, a
1.5 ◦ C temperature overshoot was within this decade, calling for immediate policy action. Delaying this action by
ten years may result in 2 ◦ C mitigation costs being similar to those required to reach the 1.5 ◦ C target if started
today, with an immediate peak in emissions, a larger uncertainty in the medium-term horizon and a higher effort
for net-zero emissions.

1. Introduction
The energy sector routinely deals with risk and uncertainty in in­
vestment decisions and will continue to do so in the face of climate
policy uncertainty. While risk could lead to profits in excess of expen­
ditures, sustained additional risk raises the energy sector’s capital cost
and could alter sustainable infrastructure investment decisions (OECD /
IEA, 2007). Further, climate policy uncertainty arises from the
uncertainty of required CO2 taxes and prices needed to meet the Paris
Agreement target under different macro-economic, demographic and
technological developments, as well as from the response of the earth’s
climate system in terms of global average surface temperature to emis­
sions concentrations. Such climate policy uncertainty weakens invest­
ment incentives for low-carbon technologies. It could lead to choices
that appear sub-optimal or extend the existing assets’ lifetimes rather
than investing in new, cleaner, more efficient ones. The uncertainties in

Abbreviations: GHG, Greenhouse gases; IEA, International Energy Agency; OECD, Organisation for Economic Co-operation and Development; IPCC, Intergov­
ernmental Panel on Climate Change; IAM, Integrated Assessment Model; ETSAP, Energy Technology Systems Analysis Program; TIMES, The Integrated MARKAL-
EFOM System; MARKAL, Market Allocation model; EFOM, The Energy Flow OptimizationModel; TIAM, TIMES Integrated AssessmentModel; LHS, Latin Hyper­
cube Sampling; MCA, Monte Carlo Analysis; SSP, Shared Socioeconomic Pathways; GDP, Gross Domestic Product; UNDP, United Nations Development Programme;
PDF, Probability Density Function; BECCS, Bioenergy with carbon capture and storage; CS, Climate Sensitivity; PV, Photovoltaic; CCS, Carbon Capture and Storage;
CDR, Carbon Dioxide Removal; DACCS, Direct Air Capture with Carbon Storage; GAMS, General Algebraic Modelling System.
* Corresponding author.
E-mail address: evangelos.panos@psi.ch (E. Panos).

https://doi.org/10.1016/j.enpol.2023.113642
Received 31 July 2022; Received in revised form 5 May 2023; Accepted 18 May 2023
0301-4215/© 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

Please cite this article as: Evangelos Panos et al., Energy Policy, https://doi.org/10.1016/j.enpol.2023.113642
E. Panos et al.
the investments in sustainable energy infrastructure arise from several
contextual factors, including the potential impacts of greenhouse gases
(GHG) concentrations on the temperature and the costs of reducing
emissions of GHG to slow down their accumulation in the atmosphere
(IPCC, 2018). Climate sensitivity is one of the most uncertain properties
to control the climate system’s response over several decades to GHG
concentration increases (i.e., the increase in global mean temperature in
response to a doubling of atmospheric concentrations) (IPCC, 2018).
The cost of climate change mitigation is influenced, among others, by
uncertainties surrounding energy demands, economic and population
growth, the capital and operating cost of clean energy technologies, and
their deployment rate – which largely also depends on resource poten­
tials, societal and political factors (Rogelj et al., 2013). In this regard,
mitigation policy is also affected by uncertainties in climate response,
economic impacts and technology costs. In the long term, there is also a
direct economic impact of physical aspects of climate change.
During COP26, there was a race to inform the media of the resulting
temperature rise from the Glasgow pledges to accelerate policy imple­
mentation and mitigate investment risks to clean technologies and fuels.
The level of false precision to within one-tenth of a degree Celsius of
temperature estimates 80 years into the future is astounding. The inte­
grated energy-climate-economy system is complex and uncertain.
Studies with Integrated Assessment Models (IAMs) representing the in­
teractions between these three systems have shown that limiting
anthropogenic temperature increase to 1.5 ◦ C requires immediate
ambitious investments in all energy sectors to enable carbon neutrality
by mid-century (Rogelj et al., 2015).
However, energy and climate literature readers are well informed of
the range of uncertainty in IAMs used to estimate future temperatures,
policy efficacy, and the investment needs to stabilise average global
temperatures. When considering a new policy, climate change and en­
ergy decision-makers need to estimate the level and type of investment
that will be made under different economic, technological, societal,
geophysical and political conditions and how a new policy might change
this investment behaviour. Considering this uncertainty, how do policy
makers know what robust and resilient decisions are and which to act
upon? Or, how do investors and policymakers know what insights are a
function of input data uncertainty, model mathematical structure,
model or modeller biases? How does this uncertainty impact investment
decisions, fuel switching and integration of the end-use sectors?
This paper explores these questions by quantifying the uncertainty of
the future configuration of the energy system associated with the
contextual factors mentioned before by developing an advanced meth­
odology and applying it to the state-of-the-art integrated assessment
model ETSAP TIAM based on the IEA-ETSAP TIMES modelling frame­
work (Loulou et al., 2016). Our analysis identifies the drivers with the
most impact on policy decisions to implement the Paris Agreement goals
and aims to shed light on the design of robust and effective climate
change mitigation policies. The study also assesses the effectiveness of
climate-change mitigation targets in restricting global average surface
temperature rise to below 2 ◦ C and 1.5 ◦ C by 2100 above the
pre-industrial levels under different economic, demographic, technical
and climate sensitivity contexts, as well as the associated energy systems
cost and technological change needed to restructure the present energy
system. Our analysis maps the uncertainty in the solution space
regarding the technology mix and investment expenditures in clean
energy technologies to enable deep emissions cuts. This uncertainty
mapping is critical to guiding investors and policymakers toward robust
mitigation pathways. However, we acknowledge that the layers of un­
certainty in our study are not expected to be resolved in the next few
decades, while policy decisions must be made now.
The structure of the paper is as follows. Section 2 deals with the
literature review, while section 3 presents the methodology we apply to
our analysis. Section 4 discusses the main findings and results. Section 5
concludes the analysis with its policy implications.
2
Energy Policy xxx (xxxx) xxx
2. Background and literature review
Uncertainty in technology costs, economic and population growth,
energy demands, resource potential and climate sensitivity, presents a
continuous challenge (IPCC, 2018) in the valuation of control policies
and decision-making under uncertainty (Lempert et al., 2003). Simple
scenario analysis with IAMs to perform policy impact assessment or
exploration has limitations (Haikola et al., 2019), and addressing un­
certainties with systematic approaches provides more robust policy in­
sights for decision-making.
There have been recent calls for systematic investigation of the ex­
tremes of the plausible distribution of climate mitigation scenarios,
particularly towards the 6th Assessment Report Cycle of the Intergov­
ernmental Panel on Climate Change (IPCC) (Emmerling et al., 2019;
Keppo et al., 2021; McCollum et al., 2020; Tavoni and Valente, 2022;
van Vuuren et al., 2020). The majority of published mitigation pathways
that explore transformation towards a net-zero carbon future have been
developed by integrated assessment models (IAMs) – see, for example
(Fragkos et al., 2015; Huppmann et al., 2018; Marcucci et al., 2017;
Rogelj et al., 2015, 2016; Sognnaes et al., 2021). These models represent
interactions among energy systems, economy and earth systems. They
are developed based on averages of a possible range of energy system
dynamics regarding future trends in population, consumption of goods
and services, economic growth, behaviour, technology, policies and
institutions. However, most existing IAMs rely on parametric scenario
analysis to explore solution spaces (Yue et al., 2018), neglecting that
projecting 50 or 100 years into the future is inherently uncertain. In­
accuracy in forecasting energy supply, demand and technology
improvement projections can be demonstrated with numerous examples
(Cooper and Smil, 2004). The impacts of the COVID-19 pandemic on the
macroeconomic and demographic drivers of IAM scenarios would not
have been thought of as probable scenarios of merit only two years ago.
The latest World Energy Outlook report from the International Energy
Agency (IEA) is dominated by this demand uncertainty (OECD/IEA,
2021).
The Monte-Carlo method is an adequate probabilistic risk assessment
approach for policy assessment related to climate change (Schneider and
Mastrandrea, 2005), and it has been applied in probabilistic evaluations
of deep decarbonisation pathways – see, for example (Kouvaritakis et al.,
2005; Kypreos, 2008; Labriet et al., 2008; Marcucci et al., 2019a; Zhang
and Chen, 2022). This approach propagates uncertainties by simulta­
neously perturbing multiple uncertain input parameters represented by
probability distributions (Saltelli et al., 2008).
However, we have not seen in the literature a robust diagnosis of the
uncertainty impact of the dominant uncertainties from the IAMs typi­
cally used to estimate outcomes of Nationally Determined Contributions
and Net-Zero pledges. Here we present a new and advanced develop­
ment of Monte-Carlo analysis into the TIMES source code and an
application to study the uncertainty in key climate change mitigation
policy outcomes using the global multiregional ETSAP-TIAM model
(Loulou, 2008; Loulou and Labriet, 2008). The present study is the first
Monte-Carlo assessment of a large-scale and full process-oriented IAM
coupled with a climate model. The Monte Carlo methodology described
in our study is computationally efficient and suitable for reducing the
complexity of uncertainty analysis when using large-scale models. It can
be effectively applied to other integrated assessment modelling frame­
works too. It is based on the Latin Hypercube Sampling (LHS) (Helton
and Davis, 2003) of multipliers that modify base values of the input
parameters, which are more intuitive and suitable to be assessed by
stakeholders and experts rather than sampling absolute levels of our
inputs. In this regard, the Monte Carlo Analysis remains valid even if the
base values are modified, and this is very computationally efficient as we
decouple the baseline scenario from the stochastic scenarios. Finally,
another methodological contribution of our study, described in Appen­
dix II, is a computationally efficient approach to solving thousands of
scenarios with large-scale IAMs on high-performance computing grids
E. Panos et al. Energy Policy xxx (xxxx) xxx

by exploiting multithreading capabilities for asynchronous submission e., local or deterministic optimisation, since global (i.e. assessing all
and collection of model solution tasks without significant message possible values of a parameter) or probabilistic optimisation (i.e.
passing overhead. considering the entire probability distribution of a random variable) is
often computationally extensive (Moret et al., 2020; Zugno and Conejo,
3. Methodology 2015; Gorissen et al., 2015). In our analysis, each variation of the input
parameters results in a different scenario and decision. Therefore
In accounting for uncertainty in energy and climate policy impact probability distributions of the model outputs are produced, suitable to
assessment and exploration, in particular with Integrated Assessment quantify uncertainty in the outcomes. It should be acknowledged that
models, there are two major sources of uncertainty: model structure these probability distributions are derived from the 4000 thousand
uncertainty and parametric uncertainty (Hainsch, 2022). Parametric scenarios assessed in our study and should not be interpreted as the
uncertainty has, however, a larger effect on the results than the model likelihood of the obtained outcomes. In this regard, the probability of an
structure uncertainty (Gillingham et al., 2015). To account for para­ outcome described in our analysis reflects the ratio of the number of
metric uncertainty, common approaches include parametric scenario or Monte Carlo experiments (or scenarios) that are favourable to this
sensitivity analysis (SA), stochastic programming (SP), robust optimi­ outcome to the total number of experiments performed.
sation (RO) and Monte-Carlo Analysis (MCA). A brief comparison of the We should also note that the integration of Monte Carlo Analysis in
advantages and disadvantages of these approaches, particularly for en­ the integrated assessment model ETSAP-TIAM does not imply that we
ergy systems analysis and integrated assessment modelling, is given in use TIAM to perform predictions. This is clearly outside the scope of the
Table 1. underlying mathematical framework of the model. Rather, we perform a
The decisions taken by a mathematical model based on stochastic what-if scenario-based assessment, which in our study is augmented by
programming are based on the expectations of uncertain outcomes from the uncertainty surrounding our outcomes based on the assumed un­
known probability distributions (Birge and Louveux, 2011). In contrast, certainty of key contextual factors that are included as inputs in our
the decisions taken by robust optimisation are usually based on extreme analysis and influence the configuration of the future energy system.
values (e.g., minimax and maximin) or at the tails of the distributions, i.
3.1. The ETSAP-TIAM integrated assessment model
Table 1
Comparison of the common approaches for energy and climate policy impact ETSAP-TIAM (or simply TIAM) is based on the open-source TIMES
assessment and exploration. energy systems modelling framework developed by the Energy Tech­
Method Main Application Advantage Disadvantage nology Systems Analysis Program of the International Energy Agency
(IEA-ETSAP). TIAM is a global instance of the open-source TIMES model
Sensitivity Explores the Easy to implement A limited number
Analysis (SA) frontiers of what-if analysis of scenarios can be
generator (Loulou et al., 2016). It is a bottom-up, process-oriented,
(Menberg model results by and tested, and the technologically detailed cost-optimisation model with a detailed repre­
et al., 2016; making sharply computationally method is ad-hoc in sentation of energy supply, conversion and end-use technologies. Be­
Tian, 2013; contrasting inexpensive its nature.No sides the energy sector, TIAM includes a single-sector economy
Hainsch, assumptions on a robustness
submodel and a reduced-form climate model. The three systems, energy,
2022) set of exogenous measures can be
variables provided economy and climate, interact altogether. Elasticities of energy service
simultaneously demands to their own prices capture a major element of feedback effects
Stochastic Develops Incorporates Computationally between the energy and economy systems. Stylised damage functions
Programming hedging uncertainty into expensive as capture feedback effects of environmental and climate degradation on
(SP) (Birge strategies prior decision-making probability
and Louveux, to resolving distributions are
economic production by reducing the economic output level by a frac­
2011) uncertainty, defined over a tion, reflecting the worsening of natural conditions.
indicating how to scenario tree of The optimisation performed in TIAM leads to an inter-temporal dy­
act now events and require namic partial equilibrium on energy markets driven by maximising the
appropriate
total global surplus, which acts as a proxy for welfare in each region of
scenario tree
reduction the model. For each represented world region, market equilibrium is
techniques assured at every stage of the energy-economy systems and across time. It
Robust Generates The solution is The obtained determines investment and operating technology decisions taken by the
Optimisation optimal decisions immunised against solution is not model.
(RO) ( accounting for a adverse probabilistic, and
Gorissen certain measure realisations of quantification of
The surplus maximisation is subject to constraints such as resources
et al., 2015; of robustness uncertain uncertainty and availability (in the form of detailed cost-supply curves), technical con­
Moret et al., against parameters.The risk is not provided straints governing the investment, operation and decommissioning of
2020; Zugno uncertainty optimisation technology, balance constraints for all energy carriers and emissions, the
and Conejo, requires minimal
timing of investment payments and cash flows, energy and climate
2015) information about
the true probability policy, etc. Non-cost decisions or short-sighted factors, like behavioural
distribution aspects of technology choice, public acceptance, or social/institutional
Monte Carlo Performs Computationally Does not provide capacity, are considered by additional constraints and appropriate cost
Analysis probabilistic risk efficient when hedging strategies, assumptions. Future expenditures are discounted to account for time
(MCA) ( assessment, the using advanced often relies on ad-
Kouvaritakis likelihood of sampling methods hoc probability
preferences and the cost of capital.
et al., 2005; achieving certain distributions and The model horizon is from 2010 to 2100, with a step length of 5 or 10
Kypreos, policy targets, could be narrower years (customisable). In this study, we use 10 years as a step length. The
2008; Labriet and quantifies than what-if temporal resolution within each year is quite coarse for computational
et al., 2008; uncertainty analyses
reasons, relevant when performing a Monte Carlo Analysis: the model
Marcucci surrounding
et al., 2019a; decision-making identifies three seasons, Summer, Intermediate (Spring/Fall) and
Zhang and Winter, with two timeslices per season, daytime and night. Fig. 1 shows
Chen, 2022; the spatial resolution of TIAM. The model is calibrated to the SSP2
Fragkos et al., storyline (Fricko et al., 2017; O’Neill et al., 2017). Baseline future en­
2015)
ergy demands are derived from the population (KC and Lutz, 2017) and

3
E. Panos et al.
Fig. 1. ETSAP-TIAM region definitions.
GDP projections (Dellink et al., 2017; Leimbach et al., 2017) of the SSP2
scenario, as well as historical data and trends regarding the population
and demographics (UNDP, 2019), GDP in purchasing power parity at
different regions (Bevir, 2012), and final energy (IEA, 2016). More in­
formation about the calibration of TIAM to the SSP2 storyline is given in
Appendix I of the Supplementary Material. A detailed description of the
TIAM model, its vast technology database and its mathematical formu­
lation is given in (Loulou, 2008; Loulou and Labriet, 2008).
3.2. Design of MCA for ETSAP-TIAM
Performing MCA with a large-scale integrated assessment model like
TIAM is computationally expensive. Thus, High-Performance
Computing Grids are utilised for asynchronous model solutions across
multiple CPUs by leveraging the Grid and Multi-threading facility of
GAMS (Rosenthal ER, 2017). The updated TIMES code supporting this
facility is available at https://github.com/etsap-TIMES/TIMES_model.
Key algorithmic insights are provided in Appendix II of the Supple­
mentary Material. A detailed description is given in (Glynn et al., 2019;
Panos et al., 2018).
We assume probability distributions for factors significantly
impacting the energy system transformation and climate change miti­
gation, such as the equilibrium climate sensitivity, economic and pop­
ulation growth, the decoupling between the energy and the economy,
the discount rate, the resource potential and investment costs of re­
newables and biomass, oil and gas reserves, the potential for CO2
sequestration in the land use and forestry and geological CO2 storage for
carbon dioxide capture and sequestration (CCS) in depleted oil and gas
fields and depleted aquifers. These factors are translated into input pa­
rameters for the model. These parameters are initialised by sampling
them from the probability distributions of the factors they represent, as
described in the next paragraph.
We perturb the uncertain model parameters using Latin Hypercube
4
Energy Policy xxx (xxxx) xxx
Sampling (LHS) (Helton and Davis, 2003) based on their probability
density functions (PDFs). The LHS method was chosen to avoid creating
large samples for obtaining meaningful statistics in MCA and reduce
computational complexity without losing statistical information of the
obtained results. The LHS process is described in Appendix III of the
Supplementary Material. The sampled value of each random variable is
either directly assigned to the corresponding TIAM parameter or is
applied as an adjustment factor to the “BASE” value of the corresponding
TIAM parameter derived from the model calibration and the determin­
istic version of the BASE_SSP2 scenario (see section 3.3). Table 2 shows
the analysis’s main random variables and their probability distributions.
By sampling these parameters, we develop uncertainty estimates
across time for major output variables of TIAM, such as temperature
change, GHG emissions, GHG concentrations, energy technologies in­
vestments, energy commodities, energy systems costs and marginal GHG
emissions abatement costs as interrelated functions of each other.
3.3. Scenarios definition
Four scenario families (each with 1000 states of the world (SOW)
cases or Monte Carlo experiments) have been analysed with TIAM,
summarised in Table 3. The reference scenario family (hereafter simply
“scenario”), BASE_SSP2, follows the SSP2 developments and bench­
marks three climate change mitigation scenarios. All climate change
mitigation scenarios allow temperature overshooting. The 2C_SSP2
scenario aims to limit the temperature increase to 2 ◦ C in 2100
compared to pre-industrial levels. The 2DS_SSP2_DA30 scenario derives
from 2C_SSP2 but assumes a delayed climate change mitigation action
starting in 2030. Finally, the 1p5c_OS_SSP2 scenario aims to limit the
temperature increase to below 1.5 ◦ C by the end of the century
compared to the pre-industrial levels.
Temperature overshooting during the 21st century is associated with
a cost function allowing relaxation of the temperature constraint in
E. Panos et al. Energy Policy xxx (xxxx) xxx

Table 2 Table 3
Key random variables, their probability distributions and how they are applied Overview of the four energy and climate policy scenario families assessed in the
to change the internal parameters of TIAM. The distributions were adapted from MCA with TIAM. Each scenario family has 1000 scenarios or states of the world,
(Kypreos, 2008; Rogelj et al., 2012; Kypreos et al., 2019; Marcucci et al., 2019b). sampled from the probability distributions shown in Table 2. Across the four
Additional information is provided in Appendix V of the Supplementary scenario families, the sampling of the different random input parameters of the
Material. ETSAP-TIAM is the same to ensure consistency, and only the climate policy
differs, as indicated in the table.
Random variable Probability The sampled value in each
distribution (mean, experiment is applied to the BASE Scenario Policy implemented Notes
variance) value of TIAM as: family
Capital cost of BECCS LogNormal (1.067, Multiplier: same across all regions BASE_SSP2 Describes the development of The assumptions follow the
0.122) to preserve learning spillovers the global energy system “Middle of the road” shared
Capital cost of solar PV LogNormal (1.067, Multiplier: same across all regions consistent with recent studies socioeconomic pathways
0.122) to preserve learning spillovers and policies, providing a (SSP2), which assumes a
Capital cost of wind LogNormal (1.067, Multiplier: same across all regions reference for comparing future continuation of global trends in
turbines 0.122) to preserve learning spillovers policy scenarios socioeconomic developments,
Capital costs of other LogNormal (1.084, Multiplier: same for all other final energy intensity and
technologies 0.063) technologies and across all sectoral shares and
regions to retain correlations and technological change (Fricko
learning spillovers et al., 2017)
Biomass potential LogNormal (1.101, Multiplier: same for all regions 2C_SSP2 Introduces to the BASE_SSP2 Temperature overshooting is
0.114) and for all different types of scenario a global constraint of acceptable during the 21st
biomass to retain correlations 2 ◦ C as the maximum post- century with a cost function
Solar PV Potential Normal (1.125, Multiplier: same for all regions to industrial temperature change allowing relaxation of the 2 ◦ C
0.122) preserve geographical from 2020 onwards to 2100 constraints in expensive
correlations overshoot conditions (Burke
Wind Potential Normal (1, 0.084) Multiplier: same for all regions to et al., 2015), reflecting a 20%
preserve geographical GDP loss per region and year
correlations 2C_SSP2_DA30 Delayed climate action. The Temperature overshooting is
Oil and Gas Potentials LogNormal (1.04, Multiplier: same for both oil and climate change mitigation acceptable under the same
0.045) gas potentials and across all policies of 2C_SSP2 start from conditions and with the same
regions to preserve correlations 2030. In this scenario, the cost mechanisms as in 2C_SSP2
CO2 storage potential LogNormal (1.101, Multiplier: same for all regions world follows the BASE_SSP2
0.114) and for all different types of CO2 trajectory until 2030, i.e., by
storage to retain correlations postponing ambitious climate
Social discount rate (%) Normal (4, 0.651) Direct replacement change mitigation policies.
Energy Service Demand Normal (1.01, Multiplier: same to all demand After 2030, the world takes
Drivers 0.077) drivers, e.g. households, floor climate change mitigation
area, lighting area, gross value action by considering the
added, industrial production etc., remaining CO2 emissions
and across all regions to retain budget.
their correlation 1p5c_OS_SSP2 Introduces to the BASE_SSP2 Temperature overshooting is
Gross Domestic Normal (1.075, Multiplier: same to all regions to scenario a global constraint of acceptable under the same
Product (GDP) 0.055) retain correlations 1.5 ◦ C as the maximum post- conditions and with the same
Population Normal (1.015, Multiplier: same for all regions to industrial temperature change cost mechanisms as in 2C_SSP2
0.032) preserve demographic from 2020 onwards to 2100
correlations
Elasticity of Energy Normal (1, 0.063) Multiplier: same to all elasticities
Service Demands to of energy service demands and The next section discusses key findings from the scenario analysis,
their Driversa across all regions to preserve
while additional results are provided in Appendix IV of the Supple­
correlations
Energy Service Demand Normal (1.067, Multiplier: same for all energy mentary Material. Extensive datasets with the key input parameters
elasticity to its price 0.122) service demands elasticities and from the Latin Hypercube Sampling and numerical results of the Monte
across all regions to preserve Carlo Analysis of the four scenario families shown in Table 3 can be
correlations downloaded from the Zenodo repository with DOI: 10.5281/zenodo.
Emissions from land- LogNormal (1.084, Multiplier: same to all regions to
use change 0.063) retain correlations
8045286
Climate sensitivity (oC) Discrete Direct replacement
distribution (0.4, 4. Results and discussion
9.8)
a
Each energy service demand (e.g., space heating) is associated with a driver 4.1. The world is ready to breach the Paris Agreement targets in the next
determining its evolution over time (e.g., number of households). The rela­ five years
tionship between the change in the driver and the change in the energy service
demand is determined by an elasticity. Today, the global average temperature increase from the pre-
industrial levels is around 1.1 ◦ C (NASA, 2022). Climate change is
expensive overshoot conditions in the magnitude of the climate damage moving exponentially, and the currently observed incremental progress
functions assessed in (Burke et al., 2015). The climate damage functions in policy-making and investment decisions is insufficient. In 2030, the
increase the cost to the economy, alter the GDP and indirectly influence temperature increases from pre-industrial levels by 1.5 ◦ C in 75% of the
the energy service demands. The penalty cost for relaxing the temper­ BASE_SSP2 scenarios - and in the 70% of all the 4000 scenarios assessed
ature constraint is 20% of global GDP in each period for every 1 ◦ C (Fig. 2). By 2050, the global average temperature increases by 2 ◦ C in
temperature increase beyond the temperature constraint applied (1.5 ◦ C 80% of the BASE_SSP2 scenarios.
or 2 ◦ C). The constraint relaxation is important to avoid infeasibilities The analysis suggests that unprecedented and far-reaching climate
for Monte Carlo experiments, especially in those with climate sensitivity policies must move quickly together with investments in low-carbon
well above the median values of 3 ◦ C per doubling carbon in the technologies. Still, immediate climate change mitigation action entails
atmosphere. an overshoot of the 2 ◦ C temperature increase by 2050 in 15–30% of the

5
E. Panos et al. Energy Policy xxx (xxxx) xxx

Fig. 2. Box and Whisker (B&W) plot of post-

industrial temperature change in ◦ Celsius for the
BASE_SSP2, 2C_SSP2, 2C_SSP2_DA30 and
1p5C_OS_SSP2 cases. The figure shows that tempera­
ture change varies smoothly as a function of climate
sensitivity (CS). CS measures how much the global
mean temperature will rise for a doubling of global
carbon dioxide concentration in the atmosphere. CS is
the main driver for those base scenarios resulting in
temperatures below 2 ◦ C in 2100. The threshold CS in
2100 of the base scenarios at 2 ◦ C is between 1.3 and
1.4. The box plots show the interquartile range (IQR)
of 50% of the scenarios, the centre line being the
median of the full scenario set, and the whiskers
showing 1.5xIQR. The scenarios of the BASE_SSP2
family, which are below 2 ◦ C in 2100, are less than
2.3% of the total number of the BASE_SSP2 scenarios
assessed.

Fig. 3. Energy System Costs outlining increased investment needs between the base case BASE_SSP2 and the Paris Agreement cases (2C_SSP2, 2c_SSP2_DA30, and
1p5C_OS_SSP2) across the range of uncertainty within the four scenarios and 1000 states of the world. For clarity, the figure is truncated to a maximum of 80 trillion
US Dollars ($Trn). Appendix IV shows the total range of the energy system cost distributions in the different scenarios.

6
E. Panos et al.
assessed scenarios (depending on aiming at 1.5 ◦ C or 2 ◦ C at the end of
the century). However, delaying the implementation of climate policies
and investments by ten years could double the risk of overshooting the
goals of the Paris Agreements by 2050. These outcomes show that there
is no extra time left for delaying policies that enable the energy transi­
tion on a global scale.
4.2. Getting the world on track to Paris Agreement targets is associated
with a high probability of high energy system costs
The energy system costs exponentially increase with the stringency
of climate change mitigation (Fig. 3). The distribution of the energy
system cost in the climate change mitigation scenarios is lognormal,
indicating high frequencies of high costs. On average, moving from
BASE_SSP2 to the 1p5C_OS_SSP2 scenarios requires a surge in the energy
system cost by 8 $Trn in 2030 and 16 $Trn in 2050. In 25% of the
1p5C_OS_SSP2 scenarios, the total energy system cost is 60% higher than
the total energy system cost of BASE_SSP2 in 2030 and 85% higher by
2050. In 4% of the 1p5C_OS_SSP2 scenarios the energy system cost in
2050 is lower than in BASE_SSP2. However, these are scenarios with
very low climate sensitivity (less than 1.7oC), high decoupling between
economic growth and energy consumption, large sustainable renewable
energy potentials to be exploited, and accelerated technology learning.
More than two-thirds of the additional investment required to limit
the temperature increase to 1.5 ◦ C are needed in emerging and devel­
oping economies. The private sector and consumers must carry out most
transition-related energy investments. In this regard, international
development banks and climate finance commitments from advanced
economies can act as catalysts to accelerate capital flows and allow
developing economies to step into a lower emissions pathway.
4.3. Delaying the climate action for achieving the 2 ◦ C target would cost
almost the same as acting now to meet the 1.5 ◦ C target
A delay in mitigation action to achieve the 2 ◦ C Paris Agreement
target results in energy system costs ranging from 22 to 102 $Trn per
year by 2050 (2C_SSP2_DA30 scenario). This range is directly compa­
rable with the energy system cost for the same year for meeting the
1.5 ◦ C target if climate policy action to achieve this target starts
immediately (22–98 $Trn per year by 2050 in the 1p5_OS_SSP2
scenario).
Delaying action can reduce costs in the short-run, as in 97% of the
2C_SSP2_DA30 scenarios, the energy costs are lower than 1p5_OS_SSP2
in 2030. However, on the net, delaying action to limit the effects of
climate change is costly.By 2050, 15% of 2C_SSP2_DA30 scenarios have
higher energy costs than 1p5_OS_SSP2. In at least the half of the simu­
lations the costs between 2C_SSP2_DA30 and 1p5_OS_SSP2 differ by less
than 7%. Moreover, a delay in the climate change mitigation action
produces persistent economic damages from higher temperatures. In the
long run, the climate policy, when implemented, must be more stringent
than it would have been if the climate action were started earlier and
thus resulting in additional financial burdens (see Fig. 4, which com­
pares the marginal cost of carbon in 2C_SSP2 and 2C_SSP2_DA30 sce­
narios; the cost of carbon in the latter is equivalent with the cost of
carbon of 1p5C_OS_SSP2 scenarios).
4.4. If it is to meet the Paris Agreement target, the worldwide average
carbon price in 2030 needs to be equal to today’s (2022) highest carbon
taxes ($ 130–137 tCO2-1) that are observed in very few countries
Today, there is a gap between the decarbonisation policies in place
and the ambition required to limit the temperature increase to below
2 ◦ C by the end of the century from the pre-industrial levels. Carbon
prices or taxes are one of the main instruments to accelerate the
decarbonisation of the economy. While carbon prices have increased in
the past years in several countries, they remain short of the levels needed
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to drive the transformative change and unlock investment essential for
decarbonisation pathways (World Bank, 2022). In the EU, the carbon
price of the European Emissions Trading Scheme breached the €100
tCO−2 1 for the first time in February 2023 (EEX, 2023).
The marginal abatement cost of CO2, which is the dual of the GHG
emissions budget constraint imposed at the global level in ETSAP-TIAM,
has in the 2C_SSP2 scenario family that limits the global temperature
increase below 2 ◦ C a statistical mean of $168 tCO−2 1 in 2030, $196
tCO−2 1 in 2050 and $ 273 tCO−2 1 in 2100 (Fig. 4). In the 1.5C_OS_SSP2
scenario family, the mean marginal cost to limit the temperature in­
crease below 1.5 ◦ C is $ 416 tCO−2 1 in 2030 and $ 430 tCO−2 1 in 2050. In
15% of the 1.5C_OS_SSP2 scenarios, the marginal CO2 cost in 2050 is
twice the mean of 2030. In the case of delayed action for achieving the
2 ◦ C threshold, 25% of the 2C_SSP2_DA30 scenarios have a marginal CO2
cost in 2050 equal to or higher than the cost of achieving the 1.5 ◦ C
threshold if the corresponding emissions abatement action starts today.
In all scenarios, the marginal CO2 cost increases with the stringency
of temperature change and can relax after a temperature target over­
shoot is reversed. At the same time, it lowers with technological change
(for instance, the correlation between the marginal CO2 cost and the
CAPEX of Bioenergy with CO2 Capture and Storage is − 0.4). The need
for strong near-term carbon pricing is clear in the 2030 and 2050 box
plots of Fig. 4. There are ramifications for early action and risk mitiga­
tion with an indication of the impact of climate sensitivity uncertainty
on the cost of mitigation. The trend begins to breakdown towards the
end of the model horizon for outlier scenarios with high climate sensi­
tivity and discount rates.
4.5. Achieving the Paris Agreement targets requires electrification and
energy efficiency delivering their maximum potential
Many governments have ambitious plans for reducing emissions
from mainly the power sector. However, this would only reduce global
emissions by one-third. Reaching the Paris Agreement targets requires
more attention to the transport, industry and buildings sectors.
Spreading the use of electricity into more parts of the energy system is a
key contributor to reducing GHG emissions from the end-uses (see
Fig. 5). Electric cooking in households increases its share to 40% on
average by 2050 in the 1.5C_OS_SSP2 scenarios at a global scale, which
is about three times higher than the average share of electric cooking in
the 2C_SSP2 scenarios for the same year – today’s share of electricity in
cooking fuels is estimated at 2.5% at a global scale. In 20% of the
1.5C_OS_SSP2 scenarios, the share of electric cooking exceeds 80% by
2050. The increased access to clean cooking suggests a clear alignment
between sustainable development goals 7 (affordable and clean energy)
and 13 (climate change mitigation).
In the residential sector, electric-based space heating accounts for
65% on average of the total space heating supply by 2050 in the
1.5C_OS_SSP2 scenario family globally, which is about 6 times today’s
share. In the 2C_SSP2 scenarios, the share of electric heating increases to
43% on average globally by 2050. In 25% of the 2C_SSP2 scenarios, the
average share of electric space heating exceeds the one of the
1.5_OS_SSP2 scenarios in 2050, further highlighting electricity’s role in
meeting climate change mitigation targets. A delay in the climate
change mitigation action by a decade would eventually require an ac­
celeration of the space heating electrification resulting in an average
share of 56% in 2050, i.e., about 13 percentage points more than in
2C_SSP2. Moreover, in 5% of the 2C_SSP2_DA30 scenarios, the share of
electric-based space heating exceeds that observed in 1.5C_OS_SSP2 by
2050. Only in less than 3% of all climate change policy scenarios the
share of electric-based heating is in 2050 at today’s level. District
heating complements electric-based heating and sees its share rising
globally to 21% on average by 2050 of the energy consumption for
heating in residential sectors in the 1.5C_OS_SSP2 scenario, which is
more than twice today’s levels (around 8% of the global heating de­
mand). Notably, the share of district heating in global heat consumption
E. Panos et al.
Fig. 4. Marginal abatement cost of carbon dioxide in $ tCO-12 for the 2C_SSP2, 2C_SSP2_DA & 1p5C_SSP2 cases and their correlation with climate sensitivity and
discount rates. The vertical grey shadow lines correspond to deciles within the distribution.
has remained stable in the last 20 years.
In industry, electrification of process heating, also via high-
temperature heat pumps, increases globally to an average of 33% by
2050 in the 1.5C_OS_SSP2 scenarios from around 19% today – and in
35% of the 1.5C_OS_SSP2 scenarios is twice the today’s share. However,
when the ambition is to limit the temperature increase to 2 ◦ C instead of
1.5 ◦ C, the share of electricity in final energy consumption in industry is,
on average on a global scale, 24% in 2050. In only 5% of the 2C_SSP2
scenarios, the industry’s electrification is higher than in 1.5C_OS_SSP2.
The fuel and technology switching in industry accelerate in the case of
delayed action. In 20% of the 2C_SSP2_DA30 scenarios, the share of
electricity in final energy consumption in industry exceeds its share in
the 1.5C_OS_SSP2 scenarios by 2050.
Finally, transport undergoes a profound transformation towards
alternative fuels, i.e., electricity, biofuels and hydrogen, in the context
of stringent climate change mitigation policy. The share of alternative
fuels in transport reaches 63% in 2050 globally in the 1.5C_OS_SSP2. In
the 2C_SSP2 scenarios, the share of alternative fuels in 2050 is somewhat
lower on average, 57%. Delayed climate action would require acceler­
ating the penetration of alternative fuels in transport in the post-2030
period. In 95% of the 2C_SSP2_DA30 scenarios, the share of alterna­
tive fuels is higher than in 2C_SSP2 in 2050 – and in 20% of the
2C_SSP2_DA30 scenarios, the alternative fuels share exceeds the share
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attained in the 1.5C_OS_SSP2 scenarios. This outcome, combined with
the similar finding in industry, suggests that a delayed climate policy
action for 2 ◦ C could significantly increase the mitigation burden for the
industrial and mobility sectors, close to the levels needed to limit the
temperature increase below 1.5 ◦ C. We should note that synthetic e-fuels
are not included in the alternative fuels in Fig. 5 and in the above cal­
culations. The synthetic e-fuels account, on average accross all the
1.5C_OS_SSP2 and 2C_SSP2 scenarios, for more than one-third of the
final energy consumption in transport by 2050. They are needed for
international long-distance aviation and navigation and long-distance
road transport in geographies with barriers (e.g., mountainous terrain)
to deploy alternative fuel infrastructure.
Across all sectors, the share of electricity in total final energy
consumption doubles from 16% today to 32%, on average, in 2050 in
the 1.5C_OS_SSP2 scenarios. There is no case in the ensemble of sce­
narios assessed in which the share of electricity remains at today’s levels
in 2030 or 2050, and at the same time, the global average temperature
increase stays below 2 ◦ C or 1.5 ◦ C in 2100. The share of electricity in
final energy consumption increases with the climate change mitigation
ambition, as 97% of the 1p5_OS_SSP2 scenarios have higher electrifi­
cation than the 2C_SSP2 scenarios by 2050.
Together with electricity, energy efficiency accelerates with the
climate change mitigation effort. In 2050, 10% of the 2C_SSP2
E. Panos et al. Energy Policy xxx (xxxx) xxx

Fig. 5. Main global developments in the end-use fuel switching and clean technology investment in the end-use sectors in the 2C_SSP2 and 1p5_OS_SSP2 scenarios in
2050. The developments are presented in histograms, with the bottom axis representing the bins of the different shares and the vertical axis the number of ex­
periments falling within a particular bin. The histograms show a clear bimodality, with high prospects for low as well as high deployment of alternative end-use
technologies. The uncertainty in climate sensitivity mainly drives this bimodality. An exception is the transport sector, where the histogram of the use of alterna­
tive fuels is closer to the one of a normal distribution with a relatively low variance compared to the rest bimodal histograms seen in the other end-use sectors. This
outcome indicates that investing in alternative fuels is a robust choice when mitigating climate change.

9
E. Panos et al.
scenarios and 80% of the 1.5C_OS_SSP2 scenarios have less final energy
consumption than the BASE_SSP2 scenarios. Moreover, in 85% of the
1.5C_OS_SSP2, the final energy consumption is lower than 2C_SSP2,
highlighting the need for higher efficiency gains for limiting the global
temperature increase to 1.5 ◦ C instead of 2 ◦ C.
4.6. In electricity supply, solar PV is a robust technology to invest in
Fig. 6 shows the global electricity supply from major options across
the four assessed scenario families. There is a significant increase in
power generation in the Paris Agreement-compliant 2C_SSP2 scenarios,
for which in 2100, its median value is 16% above the BASE_SSP2 sce­
nario. For comparison, the 1p5C_OS_SSP2 scenario family is 51% above
BASE_SSP2, highlighting the role of electrification in achieving ambi­
tious climate change mitigation targets. The dominance of solar elec­
tricity and other non-fossil fuels needed for achieving a high degree of
electrification in the end-use markets and avoiding releasing residual
carbon emissions is clear.
Interestingly, solar, other renewables, and nuclear have achieved
higher shares than fossil fuels, even in some of the BASE_SSP2 Monte
Carlo experiments (see Fig. 19 in Appendix IV). This indicates the dy­
namics underlying the commercialisation of renewable electricity as a
competitive option, i.e., that the realisation of large-scale penetration of
Fig. 6. Electricity supply in EJ/yr. at the global scale by major source in 2030, 2050 and 2100 across the base scenario and the Paris Agreement temperature
target scenarios.
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renewable-based electricity does not require additional support mea­
sures (as of today) when a strong climate change mitigation policy is
present. Therefore, solar PV is a robust technology in the power gener­
ation markets, getting market shares with or without a carbon
constraint. Nuclear power is also interesting, displaying lower uncer­
tainty in deployment towards 2100 compared to 2050, which implies
nuclear is used in all cases examined. The contribution of nuclear power
in electricity production increases in the long-term in the decarbon­
isation scenarios. This is especially pronounced after 2050/60, when the
wind and other renewable potentials are fully exploited and the addi­
tional electricity supply to meet the increasing demand needs to remain
carbon-free.
4.7. Electricity cannot decarbonise the entire system alone, and hydrogen
extends electricity’s reach to hard-to-electrify sectors
In the 1.5_OS_SSP2 scenarios, hydrogen emerges by 2030 first in
industry (on average, 76% of the global hydrogen consumption in 2030
occurs in industrial clusters), and by 2050 it scales up to automotive
applications (on average, 50% of hydrogen consumption occurs in road
transport). The mean total hydrogen supply increases from 24 EJ/yr in
2030 to 38 EJ/yr in 2050, at a global scale, in the 1.5_OS_SSP2 scenarios.
Interestingly, while in 80% of the 2C_SSP2 scenarios, the total hydrogen
E. Panos et al. Energy Policy xxx (xxxx) xxx

Fig. 7. Histograms of global hydrogen supply in 2050 in the climate change mitigation scenarios, in PJ/yr. The x-axis of the histograms represents the bins of PJ/yr.
and the y-axis the number of occurrences within each bin. Notice that the histograms of the hydrogen supply are bimodal, reflecting the uncertainty in realising a
“hydrogen economy” by 2050. The figure also indicates that high hydrogen penetration prospects are correlated with stringent climate change mitigation policy.

supply is lower than in 1.5_OS_SSP2 by 2050 at a global scale, within a
context of a delayed climate change mitigation action towards 2 ◦ C
about 60% of the 2C_SSP2_DA30 scenarios show higher total hydrogen
supply than in 1.5_OS_SSP2 (Fig. 7).
The hydrogen penetration increases with the climate change
mitigation ambition: in 80% of the 1.5C_OS_SSP2 scenarios, the use of
hydrogen is higher than in the 2C_SSP2. In less than 1% of the assessed
1.5C_OS_SSP2 scenarios, there was no penetration of hydrogen by 2050.
The distribution of global hydrogen supply in the 1.5C_OS_SSP2
scenarios shows a bi-modality. This is triggered by climate sensitivity,

Fig. 8. Hydrogen supply shares in 2050 by major technology cluster (grey = fossil hydrogen, blue = fossil with CCS hydrogen, green = hydrogen from renewable
sources and electrolysis). The shares are given as histograms. The x-axis represents the bins of the shares, and the y-axis the number of occurrences within each bin. A
delayed climate change mitigation action would require a faster deployment of green hydrogen in the long term compared to an immediate policy action to limit the
temperature increase below 2 ◦ C. This would result in stranded assets if, due to the delay in climate change mitigation action, investments are directed to fossil-based
hydrogen production. (For interpretation of the references to colour in this figure legend, the reader is referred to the Web version of this article.)

11
E. Panos et al.
which affects the stringency of the climate change mitigation action.
When the climate sensitivity is below 2.6, the intensity of the climate
change policy is not enough to make hydrogen a cost-effective option for
the future energy mix.
Hence, the analysis suggests that a) hydrogen as an energy carrier is
cost-efficient mainly under stringent climate change mitigation policies;
b) if green hydrogen production costs do not significantly drop,
hydrogen mainly emerges in those sectors with limited alternative
decarbonisation options; c) fuel cells improvements drive hydrogen
demand and infrastructure deployment.
4.8. Green is the dominant hydrogen colour under stringent climate
change mitigation targets
Green hydrogen, produced from electrolysis using wind or solar
electricity or biomass gasification with and without CCS, is the most
compatible production option to reach climate neutrality by mid-
century. In the 1.5C_OS_SSP2 scenario, green hydrogen supplies, on
average, about 80% of the global needs throughout 2030–2050 (Fig. 8).
In a context of a delayed climate change mitigation action, the mean
share of green hydrogen is 60% on a global scale – and it is the dominant
production option by 2050 in 70% of the 2C_SSP2_DA30 scenarios. In
contrast, in the 2C_SSP2 scenario, there is, on average, a production mix
with green and blue hydrogen attaining shares of 40% and 30% corre­
spondingly by 2050 (the remaining 30% is grey hydrogen). Still, green
hydrogen is the main production route in 45% of the 2C_SSP2 scenarios
by 2050. Regarding blue hydrogen, its role in the 1.5_OS_SSP2 scenarios
is limited as it emerges as the dominant production option for
2030–2050 in only 13% of the assessed scenarios. These outcomes entail
a strong investment signal towards green hydrogen with the increased
climate change mitigation ambition.
4.9. Bioenergy is needed everywhere in a net-zero emissions global energy
system
There is a trade-off in the use of gaseous, liquid and solid modern
bioenergy between the energy supply and demand sectors. In the
2C_SSP2 scenarios, the share of bioenergy in the demand sectors rises on
average to 20% globally by 2050 (from about 8% today), and a similar
trend is also in the 1p5_OS_SSP2 scenarios (Fig. 9). After 2030, there is a
shift of bioenergy consumption from the demand sectors to the energy
transformation and supply sectors which have more options to provide
negative emissions via CCS. Industry is in high need of solid bioenergy as
it can provide high-temperature heat and be co-fired with coal to reduce
the intensity of emissions of existing generation assets. The mean share
Fig. 9. Share of bioenergy (i.e., bioliquids, biogases and modern solid biomass) in global total final energy consumption (in 2020, the share is around 10%). The y-
axis shows the frequency of the bins of the shares of bioenergy reported at the x-axis.
12
Energy Policy xxx (xxxx) xxx
of bioenergy in industry on a global scale increases to 33% in the
1p5_OS_SSP2 scenarios and 24% in the 2C_SSP2 scenarios by 2050.
4.10. Emissions from existing assets are a key challenge towards
decarbonisation
Today, power and industry account for 60% of emissions. Reaching
the Paris Agreements targets will depend on tackling the emissions
challenge presented by these sectors’ long-lasting assets, many of which
were recently built in emerging economies and could operate for several
decades. While this underpins the need for hydrogen and CCS, the
analysis of this study also suggests that if pure economic optimisation at
a global scale is to be taken into account, negative emissions technolo­
gies are induced mainly in industrialised regions to compensate for the
emerging economies with increasing CO2 emissions as they continue to
rely on fossil fuels to support their economic development (see Fig.15 in
Appendix IV of the Supplementary Material regarding the regional CO2
emissions results). Apart from that, the perfect foresight optimisation of
TIAM is imposing very early carbon mitigation actions (by accounting
for lock-ins and technology deployment constraints) to create sufficient
conditions to stabilise the global average temperature change below
2 ◦ C.
Fig. 10 shows the emergent carbon budgets as a combined function of
climate sensitivity and net carbon dioxide removals for the 2C_SSP2
scenarios, the median of which attains annual carbon dioxide removal
(CDR) levels above 20 GtCO2 in 2100. This must be seen in relation to
the global carbon emissions in the BASE_SSP2 scenarios, the median of
which starts with 40 GtCO2 in 2030 and reaches values of >65 GtCO2 in
2100, while the remaining net CO2 emissions in the 2C_SSP2 scenarios
are, on average, below 10.5 GtCO2 in 2100. The amount of carbon
removal due to afforestation is between 5 and 5.5 GtCO2 from 2030 to
2080 and falls to 3 GtCO2 in 2100. Most of the contributions of CDR are
related to biomass for power generation, synthetic fuels and industry,
followed by gas and coal for industrial uses.
By overlaying Fig. 4 on Fig. 10, it can be argued that for some sce­
narios, CO2 emissions and CO2 price do not vary smoothly or unidirec­
tionally as a function of discount rate over time, nor do all scenarios
follow similar shape trajectories over the 21st century, as is typically the
case in IAM model intercomparison scenario ensembles widely per­
formed so far in the literature (McCollum et al., 2018; Kriegler et al.,
2015; Kriegler et al., 2013).
Finally, according to our results, GHG emissions neutrality is ach­
ieved between 2050 and 2060 in 50% of all assessed scenarios (Table 4).
However, the net-zero GHG emissions are achieved in the 1p5_OS_SSP2
scenarios later than in the 2C_SSP2 scenarios because of the temperature
E. Panos et al. Energy Policy xxx (xxxx) xxx

Table 4
Percentage of scenarios reaching net-zero globally in different years for the
different climate change mitigation scenario families assessed. The frequency of
scenarios achieving net-zero before 2050 is higher in the scenario with a delayed
mitigation action to avoid the economic damages from temperature over­
shooting. This result shows that delaying the climate change mitigation action
does not mean that the effort required to achieve net-zero is smaller - not acting
fast and start reducing now leads to the need to reduce more later and reach net-
zero emissions earlier.
overshooting in 1p5OS_SSP2 (see also Fig. 2). This outcome for the
1p5_OS_SSP2 scenarios implies a steep emissions reduction trajectory
between 2030 and 2040 and less steep between 2040 and 2050.
4.11. Climate sensitivity, decoupling of energy use from economic growth,
bioenergy potential and capital expenditure in solar PV and wind are the
main sources of uncertainty in technology investment and climate policy
implementation

Year Percentage of Percentage of Percentage of Percentage of

Fig. 11 shows a correlation scatter plot for some of the pertinent
scenarios scenarios scenarios scenarios
reaching reaching carbon reaching reaching carbon input perturbations and highlights the correlation with energy system
carbon neutrality carbon neutrality before mitigation transitions. Climate sensitivity influences temperature, the
neutrality before that year neutrality that year in the marginal abatement cost of CO2, primary energy supply, primary fossil
before that in the before that 2C_SSP2_DA30
energy, renewable energy, the total installed capacity of solar PV and
year across all 1p5_OS_SSP2 year in the scenario family
emissions scenario family 2C_SSP2
bioenergy carbon capture and storage (BECCS). More nuanced correla­
mitigation scenario tions are seen, for example, whereby bioenergy potential is a stronger
scenarios family driver of BECCS installed capacity than BECCS investment capital
2040 24.2% 19.7% 19.6% 31.3% expenditure (CAPEX). In contrast, solar PV installed capacity is far more
2050 43.6% 34.5% 46.9% 49.2% sensitive to CAPEX than solar resource potential. The decoupling of
2060 67.8% 56.4% 77.6% 70.5% energy intensity (“Demand Driver Elasticity” in the figure) from mac­
2070 86.7% 80.9% 86.2% 90.3%
roeconomic drivers is a critical uncertainty, as shown by the strong
2080 100% 100% 100% 100%
correlation between the macroeconomic driver elasticities (decoupling
factors) and primary energy supply. Primary energy supply in the future
becomes less correlated to energy prices and more correlated to the level
of decoupling from economic growth (see Fig. 11).

Fig. 10. Uncertainty in annual CO2 emissions, their resultant emergent cumulative CO2 emissions (Uncertainty in carbon budgets) and the induced uncertainty in
marginal abatement cost of CO2. The emissions are plotted against climate sensitivity. The figure highlights that the higher the climate sensitivity, the earlier and
higher the uptake of negative emissions technologies to avoid temperature overshoot, which entails large GDP losses from increased climate damages.

13
E. Panos et al. Energy Policy xxx (xxxx) xxx

Fig. 11. Correlation scatter plot of 6 of the total 18 LHS input distributions (vertical) against some pertinent outputs (horizontal) for the temperature-constrained
scenarios 2C_SSP2, 2C_SSP2_DA30 and 1.5C_OS_SSP2 for all 3000 Monte Carlo experiments related to the climate change mitigation scenarios. Correlations are
highlighted with solid black lines in the different scattergrams. No correlation is indicated with a horizontal solid black line, positive correlation with a line with a
positive angle and negative correlation with a line with a negative slope.

14
E. Panos et al.
5. Conclusions and policy implications
The study applied Monte Carlo Analysis to a process detailed Inte­
grated Assessment Model, the ETSAP-TIAM model. This model is based
on the open-source TIMES energy system framework developed by the
Energy Technology Systems Analysis Program (ETSAP) of the Interna­
tional Energy Agency. The analysis examined 4000 states of the world,
each with different climate sensitivity, temperature limit targets, tech­
nology costs, economic and demographic developments, resource po­
tentials, price elasticities and other demand drivers such as the number
of households, floor areas, etc. It assessed deep decarbonisation path­
ways under a context of unprecedented uncertainty in the energy sector.
The analysis identified key technologies for the future energy mix
that help limit the average global temperature increase by the end of the
century to 2 ◦ C or 1.5 ◦ C: hydrogen and synthetic fuels, CO2 capture and
storage (CCS), Direct Air CO2 Capture with Sequestration (DACCS),
nuclear, wind, solar and bioenergy. Many of these technologies are
immature or have a low deployment rate (e.g., hydrogen and synthetic
fuel pathways, electricity from CCS, or even wind turbines in several
European countries where social resistance is high). To be able to realise
the global investments shown in our analysis, they need to be further
developed and to be supported in their early uptake stages. This
outcome entails a signal to policymakers when designing energy and
climate policies to accelerate the transition.
None of the 4000 Monte Carlo experiments displays reliance on one
particular carbon mitigation option. This outcome suggests that a
portfolio approach is suitable for achieving ambitious emissions cuts,
with each alternative having different investment costs and risks. A
correlation analysis of the obtained installed capacities in the different
Monte Carlo experiments showed that many technologies play com­
plementary roles in climate change mitigation. For instance, renewable
and nuclear energy is deployed in all scenarios examined, without one
option excluding the other. Or wind and solar energy are both deployed
at high rates, and there is no energy system configuration in our analysis
relying only on one of the two. Another example is in the transport
sector, where electromobility co-exists with hydrogen and synthetic
fuels (also of biogenic source).
However, negative correlations of some technologies’ capacities
indicate competition for the same resources. This is, for example, the
case between bioenergy with CCS and DACCS due to the limited
sequestration potential. In this regard, DACCS is deployed after the
deployment of BECCS, a similar finding also noted by (Marcucci et al.,
2019).
The above correlation analysis of the obtained capacities has sig­
nificant policy implications. It suggests that policy designs promoting
specific technologies via financial or other incentives (e.g., feed-in tariffs
or priority in accessing infrastructure) or policies banning or limiting the
deployment of low-carbon options identified as robust in this analysis
(for example, due to social or political innacceptance of these options)
are likely to entail risks to delivering the required emissions cuts and
risks of high energy costs. In contrast, policies and market designs that
are more technology-neutral and are based on new market design
mechanisms, such as tenders and pools, could be attractive to investors
because they leave options open, mitigate investment risk as they are
based on market dynamics, and consider the complementarities between
the different carbon emissions mitigation options.
The global investment trends we observe today lag far behind the
levels required in the ensemble of the 4000 runs presented in this
manuscript. The energy system configurations obtained in our analysis
imply that a secure and sustainable energy supply is capital-intensive. In
20% of all scenarios examined, the energy system cost in 1p5C_OS_SSP2
by 2050 is twice the global energy system cost of the BASE_SSP2 sce­
nario. In 5% of scenarios, the energy system cost in 1p5C_OS_SSP2 is
three times higher than in BASE_SSP2 by 2050. Moreover, in more than
50% of the scenarios examined, the energy system cost in 2050 in the
1p5C_OS_SSP2 case is twice the cost of today (as calculated by the
15
Energy Policy xxx (xxxx) xxx
model) – see also Table 6 in the Supplementary Material. In addition, our
analysis suggests that the cost of the delayed action by 10 years from
now in order to limit the temperature increase by the end of the century
to 2 ◦ C from the pre-industrial levels is almost equal to the cost that
would have occurred if the ambition were to limit the increase to 1.5 ◦ C
and the climate change mitigation action would have started
immediately.
Such a capital-intensive energy system that realises the transition to
a carbon-free economy will also call for a massive mobilisation of re­
sources. A strong societal commitment is required in adopting new
technologies such as sequestration of CO2 or heat pumps and electro­
mobility, even wind turbines in many countries - to mention a few ex­
amples. In this context, investors need strong long-term pricing signals.
Energy markets require coordinated energy and climate legislation that
do not contradict the energy and climate goals (Strambo et al., 2015),
but they simplify and accelerate new projects’ permitting processes and
licensing.1
Carbon prices can provide signals to investors toward clean and
efficient technologies. Still, our analysis finds that the around 70 carbon
pricing instruments existing today worldwide (World Bank, 2022),
including taxes and emissions trading systems, are insufficient. Higher
carbon prices are needed to close the gap between pledges and policies.
For instance, the carbon levies of $ 130–137 tCO−2 1, which are only in
Sweden and Switzerland today, must be the worldwide average carbon
price by 2030. By 2050 the carbon prices need to be four times higher
than in 2030, on average. Such high carbon prices have social and po­
litical challenges. In cases of energy-intensive economies or when rev­
enues from carbon taxes are not effectively recycled within the economy
(e.g. if they are used to payback international debts), high carbon taxes
and prices could raise inflation and energy prices (Konradt and Weder,
2021). Therefore, to realise the high carbon prices suggested in our
analysis with minimum negative social impacts, tax revenue and other
redistribution policies need to be implemented to alleviate the adverse
effects of the increased cost of carbon on the most vulnerable.
The ensemble of runs analysed notes electrification as a key enabler
of the energy transition. However, the suggested electricity systems
become more weather dependent, as the electricity generation from
wind, solar and hydro overpasses by four times, on average, the fossil-
based generation by 2050. These power systems require interconnec­
tion in all grid levels, energy storage, fast-reacting grids, demand
response, and flexible generation units. Security of electricity supply will
be a major issue in many geographies, either in winter or summer –
depending on the region. To avoid a shortage of electricity supply,
policies supporting technologies that can contribute to the security of
electricity supply are essential, such as the integration of the price
component of ancillary services delivering flexibility provision into the
electricity price2, incentives for renewable energy sources with small
weather variability (e.g., geothermal or solar PV in the mountains), in­
centives for storage at different time scales, and demand response tariffs
to enable load shifts and peak shaving from consumers.
Bioenergy emerged as one of the important drivers of realising the
energy transition in our analysis. Still, its sustainable exploitable po­
tential is surrounded by high uncertainty. In scaling-up bioenergy to the
levels suggested by our analysis, a basket of policies would be needed
that foster bioenergy projects and develop bioenergy distribution
infrastructure. Among them could be policies promoting sustainable
energy crop production that does not risk food insecurity and measures
1
This result is also echoed in the recent decision of the EU to accelerate
action for one-year renewable project permits https://www.reuters.com/busi
ness/sustainable-business/eu-plans-one-year-renewable-energy-permits-faster
-green-shift-2022-05-09/.
2
In Switzerland, for example, flexibility markets are under design: https
://www.swissgrid.ch/dam/swissgrid/operation/regulation/market/flexibilit
y-market-en.pdf.
E. Panos et al.
enabling the exploitation of currently underdeveloped bioenergy sour­
ces. Especially manure, essential for the production of biogas, needs
policies to lift financial obstacles related to its use for biogas, e.g., sub­
sidies, certificates, co-fermentation with higher-energetic sources, sup­
ports for its collection from multiple and close-together farms for usage
in a single facility (Burg et al., 2019). The sustainable exploitation of
forest wood, which is so much needed for large-scale BECCS applica­
tions, requires policies balancing forest management, energetic-uses,
and non-energetic uses and eco-services provided by the forests (e.g.,
soil protection, climate regulation, pollution and water control, recrea­
tional activities) (Thees et al., 2020).
Blue and green hydrogen gain growing importance in our analysis
after 2040 at a global scale. We find a positive correlation between the
carbon price and the penetration of hydrogen in the energy mix. Still, the
future success and timing of the hydrogen economy depend on techno­
logical advancements and targeted measures. The latter should prevent
stranded assets in hydrogen production pathways that do not meet long-
term environmental criteria. Rigid climate goals and efficiency stan­
dards, or market-based mechanisms like fossil fuel taxation, may help
develop hydrogen demand. Industrial clusters may offer good opportu­
nities for low-carbon hydrogen deployment (Reigstad et al., 2022).
In our analysis, countries with high economic development and
slowly-growing energy consumption reduce carbon emissions by going
into net-negative emissions and give space within the carbon budget to
emerging and less developed economies to continue fuelling their eco­
nomic growth using fossil fuels. The timing of negative emissions tech­
nologies depends on the climate change mitigation ambition and climate
sensitivity. Meeting the Paris Agreement targets in a context of high
climate sensitivity would require deploying negative emissions tech­
nologies within this decade. Currently, only DACCS is a commercially
available technology. Still, it faces issues of scaling up as today it re­
quires a cost of carbon of about $ 1200 tCO−2 1 to be profitable,3 despite
that all negative emissions technologies’ components are known. Be­
sides costs, the main barriers hindering the wider deployment of nega­
tive emissions technologies include the social acceptance of onshore CO2
storage (Sutter et al., 2013), concerns related to the integrity of CO2
storage, and the perceived risk of carbon leakage. In this regard, policies
creating market pools for the deployment of CO2 capture and storage, as
well as policies promoting research and development and pilot
demonstration of negative emissions technologies, are needed to be in
place urgently, together with the required regulation and legislation
(IEA, 2021).
The discussion above implies that mitigation policies are directly
affected by uncertainties in climate response, economic impacts of
climate change damages and technology costs. These factors must be fed
into policy-making decisions, influencing the climate change mitigation
policy effectiveness. In turn, this means that the uncertainty of these
three factors will affect the mitigation costs that companies and con­
sumers face.
In evaluating our methodology, we note that this is a first-of-a-kind
Monte Carlo Analysis with a large-scale process-based integrated
assessment model. To achieve this, significant progress was made in
linearising all non-linear functions of the macroeconomic model,
allowing to perform MCA analysis within a linearised model
formulation.
Other scholars can apply this method, described and provided as
open-source in Appendix III. Besides the methodology we used here,
probability density functions of stochastic input can also be generated
via a questionnaire addressing an expert’s opinion or, like in the Pro­
metheus model (Fragkos et al., 2015), based on systematic econometric
analysis. Quadratic damage functions of temperature change with
3
See for example https://climeworks.com/subscriptions. By multiplying the
monthly subscription with 12, we get the estimate of the carbon price need to
be effective to operate the Direct Air Capture unit today.
16
Energy Policy xxx (xxxx) xxx
stochastic coefficients can also be included, and the problem can be
solved by minimising the system’s cost-plus abatement plus damages in
quadratic programming formulations. Moreover, elements of Robust
Optimisation, e.g., for energy security issues (Babonneau et al., 2011),
can also be introduced.
Limitations in our analysis include the low temporal and spatial
resolution of the framework, which is particularly relevant for the
integration of high shares of renewable energy and identification of local
constraints in the deployment of clean technologies, the perfect fore­
sight character of the TIMES framework that reduces the uncertainty
during the evolution of the energy system within a particular Monte
Carlo experiment, and the need to additionally consider in the MCA
model input parameters such as deployment rates of technologies and
bounds on variables that become binding in some experiments and they
are often equally uncertain with the main drivers influencing the evo­
lution of the future energy system.
Data and code availability
The TIMES code is available at IEA-ETSAP GitHub (https://github.
com/etsap-TIMES/TIMES_model) as open-source. The code used in
this paper to perform Monte Carlo Analysis is also available at IEA-
ETSAP https://iea-etsap.org/projects/TIMES-MCA%20Final%20R
eport.zip, together with extensive documentation on how to use the
scripts for solving the TIMES models over High-Performance Grid
Computing. Together with the scripts, we also provide a Latin Hyper­
cube Sampling routine and the probability distributions used in this
manuscript https://iea-etsap.org/projects/TIMES-MCA%20Final%20R
eport.zip. A Supplementary Data File containing the input samples for
the Monte Carlo Analysis and the numerical results from the 4000 sce­
narios (at a global scale) can be downloaded from a Zeonodo repository
with DOI 10.5281/zenodo.8045286. Other data and codes needed to
reproduce the current work are available by the authors upon a
reasonable request.
CRediT authorship contribution statement
Evangelos Panos: Conceptualization, Funding acquisition, Project
administration, Formal analysis, Writing – original draft, Writing – re­
view & editing. James Glynn: Methodology, Software, Resources, Data
curation, Investigation, Visualization, Formal analysis, Writing – orig­
inal draft, Writing – review & editing. Socrates Kypreos: Conceptuali­
zation, Funding acquisition, Supervision, Formal analysis, Writing –
original draft, Writing – review & editing. Antti Lehtilä: Methodology,
Software, Validation. Xiufeng Yue: Data curation, Resources. Brian Ó
Gallachóir: Writing – review & editing. David Daniels: Writing – re­
view & editing. Hancheng Dai: Writing – review & editing.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
A Supplementary Data File containing the input samples for the
Monte Carlo Analysis and the numerical results from the 4000 scenarios
(at a global scale) can be downloaded from a Zeonodo repository with
DOI 10.5281/zenodo.8045286. Additional data will be made available
by authors upon a reasonable request.
Acknowledgements
This work has been performed within the project “Addressing Un­
certainty in TIMES using Monte Carlo Methods” supported by the
E. Panos et al. Energy Policy xxx (xxxx) xxx

International Energy Agency Technology Collaboration Programme assessment models. Environ. Res. Lett. 16, 53006 https://doi.org/10.1088/1748-
9326/abe5d8.
Energy Systems Technology Systems Analysis Programme (ETSAP). The
Konradt, M., Weder, B., 2021. Carbon Taxation and Inflation: Evidence from the
authors would also like to thank the anonymous reviewers for their European and Canadian Experience. Graduate Institute of International and
constructive comments in improving the quality of the manuscript Development. Studies Working Paper No. HEIDWP17-2021. http://hdl.handle.
during the peer-review process. net/10419/238108.
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