Accepting the near-term reality of RCP8.5

The data doesn’t lie about which path we’ve continued to choose and the climate risk we need to be ready for.

Any discussion of future climate risks inevitably results in the question: “which climate scenario should I believe, RCP4.5 or RCP8.5?” At risQ, we usually tell clients to focus on RCP8.5. But why? And what are the difference? The RCPs, which is an acronym for Representative Concentration Pathways, are four different climate scenarios used in the modeling and research efforts for the 2014 Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report (AR5). The defining characteristic of each RCP is the amount of additional energy that will be in the Earth’s climate system in the year 2100. The additional energy in each RCP, also known as radiative forcing, is associated with specific greenhouse gas concentration trajectories from 2005 through to the end of the century.

According to the IPCC: “The RCPs were chosen to represent a broad range of climate outcomes, based on a literature review, and are neither forecasts nor policy recommendations”. In other words, the RCPs are not predictions of possible futures, but simply models that allow us to examine how the climate might evolve and change under a broad range of global policy, economic, and technological futures. RCP4.5, described as the “intermediate scenario”, assumes shifts in technology that inadvertently result in lower emissions over time. RCP8.5 on the other hand is the high-end scenario in which emissions continue to rise over the century. While many have referred to RCP8.5 as the “business-as-usual” scenario, some describe this label as misleading given the current and projected shift away from coal[1].

Given the range of opinions as well as the uncertainty around whether as a society we will divest from fossil fuels in the way we intend to, picking the “right” RCP scenario seems daunting. If 2100 is the time horizon of interest, then understanding the benefits of a lower emission future is critical for making important and necessary policy decisions now. However, if you are interested in understanding near-term to mid-century risks, then you need to look towards the scenario that best reflects our current state. With that in mind, we turn to a recent study showing that current cumulative carbon dioxide emissions, which is what determines global-mean temperature, fall within 1% of those predicted by RCP8.5[2]. It is important to keep in mind that the RCP8.5 2020 cumulative carbon dioxide value comes from 15 years of projected emission concentrations (2005–2020). As the authors emphasize, the 2020 cumulative carbon dioxide value in so close agreement with the RCP8.5 projection that the 15 years of mitigation and emission reduction required under RCP4.5 clearly did not occur. By corollary, this means we’re well on our way to RCP8.5 being our 2050 reality. How bad is that for the US? Just for wildfire, here’s what we’re moving towards:

For good measure, and before the non-wildfire prone areas of the country get too comfortable, a 2050 RCP8.5 scenario for inland flood risk sees the total loss cost for single family residential homes increase by ~19% — bringing the annual expected loss cost up from ~$48B to ~$56B. The greater New England area down through the Midwest carries much of that burden, although just through shear scale, California and its regions that suffer from periodic rainfall-driven deluge, will have its own problems. When it rains, it pours. Where it doesn’t rain, it burns. The vast majority of that risk across the country won’t have flood insurance going on current insurance take-up rate trends. Needless to say, the southeast (for hurricane risk) and coastal areas (for coastal flooding) will have their own RCP8.5 cross to bear.

On-going analysis and careful consideration of which scenario is more likely to describe the Earth’s long-term end-of-century climate path is an evergreen obligation. However, on timescales most relevant to risQ and our clients, it is abundantly obvious that predictions of risk under RCP4.5 will likely be skewed and underestimate nearer term realities. While as a society we should certainly be enacting policies to put ourselves on a lower emission trajectory, in the near-term to mid-century timeframe, RCP8.5 unfortunately represents our very plausible future.

Thankfully our clients in the financial services and investment sectors are fully informed and positioned to act accordingly.

[1] Hausfather & Peters (2020). Emissions — the ‘business as usual’ story is misleading, Nature 577, 618–620 doi:

[2] Schwalm, Glendon, & Duffy (2020). RCP8.5 tracks cumulative CO2 emissions. Proceedings of the National Academy of Sciences 117 (33), 19656–19657 doi:



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