A Crisis-Proof Electrical Power System: Desirable Characteristics and Investment Decision Support Approaches

Анотація. Економічний розвиток підприємств у світі та в Україні 2020 року та на майбутнє дедалі більше залежатиме від урахування нових економічних ризиків, серед яких уже сьогодні доцільно виділити такі: кліматичні, епідеміологічні (передусім — коронавірусні), деглобалізаційні, протекціоністські, популістські, нерівність у доходах. На тлі коронавирусної пандемії і породженої нею економічної кризи найбільше постраждав сектор вітчизняного малого та середнього бізнесу, орієнтований на надання офлайн-послуг. Фактично попит на послуги індустрій громадського харчування, розваг, туризму, гостинності, а також beauty-індустрії і непродовольчого ритейлу в умовах карантину впав у рази. При цьому необхідність платити заробітну плату, податки, соціальні внески, орендні платежі, кредити банкам і контрагентам за постачання та інші послуги зберіглася. Водночас усі види бізнесів, які не встигли перейти на надання товарів і послуг в онлайн-форматі або дотримуються бізнес-моделей, пов’язаних виключно з наданням персональних офлайн-послуг, схильні до ризику банкрутства в майбутньому. Наслідком карантину стане економічна криза, а значить і скорочення купівельної спроможності, зміна споживчої поведінки. Загалом, відбулося порушення традиційної сезонності продажів, змінюються тенденції внаслідок падіння доходів споживача. Водночас прискореного розвитку дістають цифрові послуги: електронна комерція, платіжні системи та послуги замовлення і доставки он-лайн. Також серед інших економічних ризиків у діяльності підприємств особливої уваги набуває необхідність визначення та оцінка фінансово-кліматичних ризиків, які виникають унаслідок обмежень, що накладаються міжнародними організаціями та окремими країнами на бізнес. Відповідно, підприємства, які здійснюють кліматично небезпечну діяльність, повинні розраховувати свої фінансові втрати на перспективу, якщо вони будуть продовжувати подібний бізнес. Проблемою є й той факт, що поки фінансово-кліматичні ризики та інші нові економічні ризики достатньо не вивчені та не систематизовані, а також не досліджено їхній вплив на фінансовий стан підприємств як у світі, так і в Україні. Ключові слова: нові економічні ризики, підприємство, деглобалізація, протекціонізм, економічний популізм, економічна нерівність, Україна. Формул: 0; рис.: 2; табл.: 0; бібл. 14.

The financial system could help achieve the global climate targets by aligning investments to sustainability. However, investors are largely exposed to carbon-intensive assets that could become stranded, thus delaying the low-carbon transition and bringing new sources of risk for financial stability, i.e., climate-related financial risks. Here, we discuss climate-related financial risks, the challenges they pose to traditional economic and financial risk assessment, and the implications for the implementation and feasibility of climate policies. We then present science-based approaches that introduce forward-looking climate risks and their deep uncertainty in financial risk management (e.g., via the climate value at risk, climate spread, climate stress-test). Finally, we present results of applications aimed at pricing climate risks in investors’ portfolios and calculating the largest losses that could lead to systemic risk, in collaboration with leading financial institutions.

In the course of the intensification of globalization and integration processes in the world economy, activities of small enterprises are becoming increasingly exposed to new economic risks. This accounts for the necessity to determine the level and dynamics of interest in the theme of economic risk as well as for the emerging need to improve the system of its state regulation. The purpose of the research is to model the processes of assessing the level of interest and making decisions to improve the mechanisms of state regulation of economic risk. The research methodology is based on the use of the method of Internet resources analysis, the method of forecasting, the method of exponential smoothing, the decision support system (hereinafter DSS) Decision Making Helper, etc. In determining the level of interest in the theme of economic risk and conducting an analysis of it, Google Trends web application tools were used based on search queries for the category “economic risk” in Ukrainian, Spanish, Chinese and English. Based on the obtained data, trend line models were constructed for the distribution diagrams of search queries for the concepts of “riesgo económico” and “economic risk”, which have a satisfactory value of approximation reliability and can be used for forecasting. At the same time, the trend models for analysing user interest trends in Ukraine are of low quality. With the use of the DSS Decision Making Helper, the assessment of alternative options for state regulation of economic risk in small enterprises activities was carried out. In particular, the priority of improving the taxation process as the most effective and relevant mechanism was determined. The practical significance of the research findings suggests that the developed proposals can be applied in assessing the level and dynamics of interest in the theme of economic risk as well as in making decisions on its state regulation.

Climate change and coastal environmental risk perceptions in Florida

Climate change exposure, risk management and corporate social responsibility: Cross-country evidence

Objective: Climate risk is one of the major challenges for the energy sector globally. The energy transition and the struggle against climate change are putting increasing pressure on energy entities as well as create a need for action to mitigate climate risks. The purpose of this article is to characterise climate risk in the energy sector, with a focus on the electric power sector, as well as to review their impact on the functioning of energy entities. Research Design & Methods: This article reviews the literature and uses publicly available data on the operation of the electricity system and the price of CO2 emission allowances in the EU ETS so as to characterise the impact of climate risk on the energy sector with a particular focus on the Polish electricity sector. Findings: Climate risk is one of the most important risks determining the functioning of entities in the energy sector and affecting the energy transition. It manifests itself in the form of the emergence of a set of new risks: carbon risk, weather risk, financial risk, regulatory risk, and social risk, all of which directly affect energy operators and reshape the energy sector. Implications/Recommendations: The above creates the need to adapt and adjust to current market trends as well as the need to mitigate climate risks in order to keep a market position. It is, therefore, necessary to implement climate risk management measures to adapt the company’s operations to changing market realities and an increasing exposure to climate risk. The results of the study can be used by policymakers and decision-makers responsible for energy policy and companies’ strategy related to energy transition and compliance with the ESG standards. Contribution/Value added: The research contributes to the field of climate risk in the energy sector. The value added of the paper is the interdisciplinary approach to a broad concept of climate risk, consisting both of transition and physical risks, with a detailed analysis about its influence on the energy sector.

High and volatile fossil fuel prices, growing concerns over energy security and the risk of climate change have all contributed to revived interest in nuclear power around the world. This is particularly the case in fast developing ASEAN countries. However, there is still considerable uncertainty about the prospects of nuclear power in terms of its economic viability and associated risks given a highly uncertain future energy industry context. This paper employs a stochastic tool based on the Monte Carlo simulation technique to assess the expected generation costs and risk profiles of different electricity generation portfolios of coal, Combined Cycle Gas Turbine (CCGT), and nuclear plants. The tool explicitly incorporates uncertain future fuel and carbon price, and plant capital costs into the analysis. Results from the model enable tradeoffs between expected system generation cost, associated risks and CO2 emissions among generation portfolios to be identified. In this paper the economics of nuclear power in relation to coal and CCGT are evaluated for different portfolio mixes under a number of scenarios of future fuel and carbon prices in the context of the ASEAN region. Results highlight the important role that a carbon price is likely to play in making nuclear power an economic option.

There seems to be no agreed taxonomy for climate-related risks. The information in firms’ climate risk disclosures represents a new resource for identifying the priorities and strategies of Australian companies’ management of climate risk. This research surveys 839 companies listed on the Australian Stock Exchange for the presence of climate risk disclosures, identifying 201 disclosures on climate risk. The types of climate risks and the risk management strategies were extracted and evaluated using machine learning. The analysis revealed that Australian firms are focused on acute physical climate risks, followed by market and regulatory risks. The predominant management strategy for these risks was to use a risk reduction approach, rather than avoiding or transferring risk. The analysis showed that key Australian industry sectors, such as materials, banking, insurance, and energy are focusing on different mixtures of risk types, but they are all primarily managing risks through risk-reduction strategies. An underlying driver of climate risk disclosure was composed of the financial implications of climate risk, particularly with respect to acute physical risks. The research showed that emission reductions represent a primary consideration for Australian firms in their disclosures identifying how they are responding to climate risk. Further research using machine learning to evaluate climate risk disclosure should focus on analysing entire climate risk reports for key topics and trends over time.

Widespread changes to climate-sensitive systems are placing increased demands on risk assessments as a key for managing climate risk, enabling adaptive responses and enhancing system resilience. Although the complex, uncertain and ambiguous nature of climate-sensitive systems has been long recognised, recent attention on concepts such as compounding and cascading risks, deep uncertainty and ‘bottom-up’ risk assessment frameworks have stressed the need to more explicitly confront the overarching theme of systemic complexity. Drawing on insights from the field of systems thinking, we provide a theoretical foundation for addressing systemic complexity when assessing climate risks. We first describe the sources of systemic complexity as they pertain to climate risk, and highlight the role of climate risk assessment as a formal sense-making device that enables learning and the organisation of knowledge of the interplay between the climate-sensitive system and its (climatological) environment. We then highlight boundary judgements as one of the core concerns of risk assessment, acting as a filter of both information and value judgements, and thereby creating islands of analytical and cognitive tractability in a complex, uncertain and ambiguous world. Yet boundary judgements necessarily result in partiality, leading to the need for boundary critique, which emphasises the need of multi-methodologies and second-order learning processes as part of standard risk assessment practice. We build these concepts into a framework that divides climate risk assessments into five distinct but interrelated concerns or ‘problematics’ that collectively can be used as a starting point for managing systemic complexity in the assessment of climate risk. 

Climate change is both a physical and social phenomenon in which individual understandings are contextualized within broader considerations: individuals are not ‘blank slates’ receiving information about climate change, but that information is always and inevitably filtered through values and worldviews. Personal experience, local knowledge, and social-learning influence climate risk perception and vary substantially among countries and regions. Likewise, they differently affect individuals and social groups at the regional and local scale, among whom exposures, attitudes, and capacities to manage risks vary greatly. A climate storyline approach is hence well-suited to study human observations, compound climate risks, and inform and conceptualize human–water systems interactions. Narrative storylines are used as input drivers to climate models, to represent different development pathways, which are usually characterized and applied at national and sub-national scales. Storylines aim to provide new social scenarios that address local human cognition uncertainties and improve human behavior modelling and robustness when addressing decision-making processes. Climate risks and hazards understanding can be communicated by presenting the experiences or a sequence of events, facts, and observations that are plausible and potentially critical for the system under study. Methods guiding storytelling are usually focused on conducting interviews with stakeholders, carrying out collective workshops, developing appropriate focal questions, and iterating between model results and key stakeholders. Therefore, can other data collection tools be used to reduce uncertainty in physical aspects of climate change from individuals’ local experience and perception? This contribution presents a triple-loop survey to detail the core elements of farmers’ perception and behavior when addressing climate change risk. We collect first-hand observations from northern Italian farmers about how climate change affects their activity and how extreme events are conditioning their adaptation capacity. Emphasis is placed on understanding the driving factors (risk awareness, perceived impacts, and adaptation measures and barriers) involved in the physically self-consistent past events and the plausibility of those factors. Moreover, we want to test if these factors can provide relevant implications for appropriately modelling storylines in decision-making processes. Tentative results can be useful to discuss the methodological framework of storylines building and narratives modelling, and at which point surveys can be an alternative and complementary way of dealing with deep uncertainty within climate risk management and social scenarios modelling.

The impacts of climate change on society and the natural environment are being experienced now, with extreme weather events increasing in frequency and severity across the globe. To keep the Paris Agreement's ambition of limiting warming to 1.5°C above pre-industrial levels there is now also a need to establish and scale a new sector to remove CO2 at Giga-ton scale for over a century. Despite this mounting evidence and warnings, current climate policy in the UK and globally falls far short of achieving the required reductions in CO2 emissions or establishment of a new removal sector needed to stave off the risks posed by climate change. Some of the science on climate risk is well-evidenced, but the policy response is lacking in effectiveness. Other evidence to design policy, such as Carbon Dioxide Removal (CDR), is fraught with deep uncertainty. Why are the plethora of scientific evidence, assessments and decision support tools available to decision and policymakers not always translating into effective climate-net zero policy action? How can emergent evidence be introduced to shape new sectors such as CDR? What are the capacity gaps? Through a combination of literature review, interviews and UK policy workshops over 17 months these are some of the questions that this contribution sought insight. We set out three recommendations for policymakers and other stakeholders, including academic researchers and third sector organizations, to address the identified gaps associated with translating climate risk and net zero decision support into effective climate policy:• Enhance collaboration between decision-makers, policymakers, analysts, researchers, and other stakeholders to co-develop and co-design operational climate risk assessments and policies, relevant to context.• Identify the research and capacity gaps around climate risk decision-making under uncertainty, and work with stakeholders across the decision value chain to ensure those gaps are addressed.• Co-create effective translation mechanisms to embed decision-support tools into policy better, employing a participatory approach to ensure inclusion of diverse values and viewpoints.It is fundamental that there is improvement in our understanding about how we can make good decisions and operationalize them, rather than simply focus on further research on the climate risk and net zero problem.

Deep uncertainty suggests situations in which the parties to a decision lack consensus on 1) the structural models to describe interactions among a system's variables, 2) the stochastic models to represent uncertainty about key parameters in the models, and 3) the methodologies to value the desirability of alternative outcomes. Deep uncertainties need to be addressed in strategic planning and priority-setting for transportation systems. In this context, traditional economic analysis and risk analysis of particular uncertainties can be prohibitive due to sparse data, complex models, and unforeseen interactions of climate change with other stressors. Nevertheless, decision-makers and planners need to assess the system vulnerability and allocate resources to address the range of deep uncertainties. Recent work in this topic has quantified the influence of deep uncertainties from a single management perspective, via expert elicitation to update the priorities of strategic resources for climate and non-climate stressors. There remains a need to address the multiple perspectives of priority-setting. For transportation agencies, the key perspectives include asset management, project selection, policy making, demographic/geographic equity, and others. This dissertation identifies and quantifies the influence of climate change combining with other sources of uncertainty to priority-setting in several perspectives. The approach adopts methods of multiple criteria decision analysis and scenario-based planning that have been used by agencies for long-range transportation plans. The approach is demonstrated with the Hampton Roads region of the Commonwealth of Virginia, USA. The results include that climate change combining with increased travel demand is relatively influential to priority-setting across scenarios that include economic downturn, ecological change, wear and tear, and climate change alone. The influential scenarios are shown to differ by perspective.

The Polar Bears can Sink or Swim, but the Stock Market needs to Soar

The purpose of this study is to analyze the influence of college students' risk perception of overseas travel on their information-seeking behavior and to empirically verify whether prior knowledge of overseas travel has a moderating effect between risk perception and information-seeking behavior. Data were collected through a questionnaire survey among university students, with a sample of 200 students used for the final analysis. To ensure the validity and reliability of the study, exploratory factor analysis and Cronbach's α value were conducted, and multiple regression and hierarchical regression analyses were performed using SPSS version 28. Firstly, among the four sub-factors of overseas travel risk perception (social risk, functional risk, economic risk, and climate change risk), social risk was found to negatively affect information-seeking behavior, while functional risk had a positive effect. Secondly, the moderating effect of prior knowledge of overseas travel between overseas travel risk perception and information-seeking behavior was examined. It was found that prior knowledge positively influenced information-seeking behavior, especially in its interaction with climate change risk. This study provides insights into how college students perceive risk and seek information in relation to overseas travel, and contributes to our understanding of the moderating role of prior knowledge of overseas travel between specific risk perceptions and information-seeking behavior.

Portfolio assessments for future generation investment in newly industrializing countries – A case study of Thailand