Projections vs. scenarios

Projections vs. Scenarios: what’s the difference?

A projection like the Outlook starts with current factors such as public policy and commercially available technology and then evaluates how they might change over time. In contrast, many scenarios start with a hypothetical outcome and work backward to identify the factors that need to occur to achieve that outcome. Both are important views. Back-casted scenarios help society understand the actions that may be needed to achieve a hypothetical outcome while projections help society understand the current path.

How do scenarios inform?

ExxonMobil considers a range of scenarios – including those we view as remote – to help inform the company’s strategic thinking. No single pathway can be reasonably predicted, given the wide range of uncertainties. Key unknowns include yet-to-be-developed government policies and advances in technology that may influence the cost, pace, and potential availability of certain pathways. Scenarios that employ a full complement of technology options are likely to provide the most economically efficient pathways. What also remains uncertain is how quickly and to what extent businesses and consumers will be willing to pay for carbon reductions in the products and services they use, which is essential to creating a market that incentivizes an accelerated path to net zero.

Unlike the company’s Outlook, many scenarios, such as the IPCC Likely Below 2°C start with a hypothetical outcome and work backward to identify the factors that need to occur to achieve that outcome.

Views to 2050: Different Assumptions Produce Dramatically Different Paths

Views of the future path of the world’s energy system and emissions levels can be grouped into two categories.

• Society’s Current Trajectory
  • ExxonMobil’s Global Outlook bases its view of energy demand and supply through 2050 on observable trends in population, economic development, policy, technology and consumer preferences.
  • The International Energy Agency’s Stated Energy Policies Scenario (STEPS) reflects a sector-by-sector assessment of current policy in place or announced by governments around the world.
• Paris-Aligned Scenarios
  • The U.N. Intergovernmental Panel on Climate Change’s (IPCC) database contains 311 scenarios defined as pathways with a 67% likelihood of limiting peak warming to below 2°C throughout the 21st century. These are labelled IPCC Likely Below 2°C scenarios.
  • The International Energy Agency’s Announced Pledges Scenario (APS) assumes that all aspirational targets announced by governments are met on time and in full, including their long-term net zero and energy access goals.

It is important to note that according to the U.N. Environment Programme Emissions Gap Report, the current Nationally Determined Contributions (NDCs) to emissions reductions that countries have pledged to make by 2030 are not yet within a Likely Below 2°C pathway. It further states that G20 members as a group do not have policies in place to achieve their current NDCs.

ExxonMobil’s view is that while any one scenario may be remote in probability, all of these projections and scenarios are useful in informing the company’s long-term strategic thinking.