By Gowri Suresh Babu
As actuaries, we are trained to model uncertain futures. Probabilities are one of the most used tools in our actuarial toolkit, and are a very powerful metric. The common example that affects everyone’s daily life is the weather – probabilities are used to make predictions which help us to decide whether or not to take that umbrella!
Climate change has many uncertainties over an extended period. Gowri Suresh Babu considers combining probabilities, a Markov model and the Representative Concentration Pathways (RCPs) to gain useful insight into what RCP the earth may be in at future points of time.
By Louise Pryor and Simon Sturgis
In May 2021 the Royal Institute of British Architects (RIBA), the London Energy Transformation Initiative (LETI) and the Whole Life Carbon Network (WLCN) published Carbon Definitions and Targets. These consolidate targets previously published separately by the RIBA, LETI and the Greater London Authority (GLA), and provide a Framework for going forward.
The document links the RICS methodology to specific Definitions and Carbon Targets with the aim of standardising and coordinating these aspects of carbon assessment and reporting.
In this paper Louise Pryor and Izaak Jephson outline the potential for reforestation and its impact on atmospheric carbon, as well as some of the additional benefits it can provide. They then discuss issues around the timing, permanence and uncertainty of the carbon removal provided by reforestation.
In this paper Dr Paul Pritchard and Roelof Coertze introduce some key characteristics of carbon credits as well as the challenges they
present, both practical and ideological.
In this article, Tim den Dekker proposes how actuaries should use their unique skills to help tackle the climate emergency. Strong conceptual parallels can be drawn between existing accounting and actuarial concepts in managing risk in the insurance industry and those required to do the same for the global climate. These close conceptual parallels point to a clear opportunity for actuaries — who already oversee and sign-off many aspects relating to the solvency management of insurance companies as a core competency — to be suitably up-skilled take on a central role in the solvency management of the global climate.
Actuaries regularly use discounting as a tool for determining the present cost of future payments. In ACC discussion paper 1, Louise Pryor considers the applicability of discounting to carbon emissions and whether there are other tools that could be used to address the time value of carbon.