JP

Abstract: Methane (CH4) possesses a notably higher warming potential than carbon dioxide despite its lower atmospheric concentration, making it integral to global climate dynamics. Wetlands stand out as the predominant natural contributor to global methane emissions. Accurate modeling of methane emissions from wetlands is crucial for understanding and predicting climate change dynamics. However, such modeling efforts are often constrained by the inherent uncertainties in model parameters.

Our work leverages machine learning (ML) to calibrate five physical parameters of the Energy Exascale Earth System Model (E3SM) land model (ELM) to improve the model’s accuracy in simulating wetland methane emissions. Unlike traditional deterministic calibration methods that target a single set of optimal values for each parameter, Bayesian calibration takes a probabilistic approach and enables capturing the inherent uncertainties in complex systems and providing robust parameter distributions for reliable predictions. However, Bayesian calibration requires numerous model runs and makes it computationally expensive. We employed an ML algorithm, Gaussian process regression (GPR), to emulate the ELM’s methane model, which dramatically reduced the computational time from 6 CPU hours to just 0.72 milliseconds per simulation. We exemplified the procedure at a representative FLUXNET-CH4 site (US-PFa) with the longest continuous methane emission data.

Results showed that the default values for two of the five parameters examined were not aligned well with their respective posterior distributions, suggesting that the model’s default parameter values might not always be optimal for all sites, and that site-specific analysis is warranted. In particular, analyses at sites with different vegetation types and wetland characteristics could reveal more useful insights for understanding methane emissions modeling.

Abstract: This paper proposes a methodology for quantifying the climate-related transition impacts on energy-intensive companies. In this study, we use a publicly available dataset created by the Bank of Canada that combines the scenarios developed by the MIT Economic Projection and Policy Analysis (EPPA) model with the results from two macroeconomic models (ToTEM and BoC-GEM-Fin) to illustrate price and production patterns for 10 emission-intensive sectors across 8 aggregated regions. Our focus lies on mapping the trajectories of future sectoral revenues and operating expenditures (direct and indirect costs) to company-level impacts. We align these indicators with the top-down approach used by the European Central Bank to measure issuer-specific exposure to transition risk. By incorporating company-level data, such as revenues in sub-activities and direct emissions, we are able to compute issuer-level financial statements that are particularly relevant to define scenario- based equity valuation ratio and corporate credit risk. By examining the narrative established by the Network for Greening the Financial System (NGFS) – which includes current policies, nationally determined contributions, net-zero targets, staying below 2°C, and delayed transition – we assess the added value of employing such models for asset allocation. The conclusions drawn from our case study analysis suggest a significant heterogeneity within sectors and demonstrate that the diversification of corporate revenues in sub-activities leads to distinct valuation patterns.

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