Opportunities and challenges in climate risk: from global policy to carbon budget quotas 

Climate Risk Opportunities Article Guide 

This article mainly discusses climate risks and opportunities, and delves into the impact of carbon budgeting and quota management on companies from a global policy perspective. The article highlights the increasing climate risks faced by companies with the implementation of international climate policies such as the Emissions Trading Systems (ETS) and Carbon Tax, particularly in asset management and financial disclosure. 

The article highlights the need for companies to adapt to these policies through innovation and transformation, noting that disclosure about climate risks is becoming increasingly important. The article also specifically mentions the importance of the TCFD (Task Force on Climate-related Financial Disclosures) report, arguing that companies should strengthen their awareness of climate risks and proactively disclose them to ensure competitiveness in the global market. This not only helps companies reduce financial risks due to policy changes but also seizes future opportunities such as renewable energy investment and the application of low-carbon technologies. Specifically, this article provides specific strategies for how companies can respond to global climate policy changes, while reminding them to respond to policy risks and capitalize on market opportunities through scientific and reasonable carbon budgeting and quota management. 

1. The relationship between the 1.5°C limit set by 2050 and the standard 

2050 net-zero target and the 1.5°C global temperature rise target can be explained from three key elements: carbon budget, CO2 ppm (atmospheric carbon dioxide concentration), and tons of carbon dioxide emissions. These elements have a close interaction with each other, as follows: 

1. 2. Regarding the 2050 net-zero goal (Net-Zero by 2050) 

• goal: The world needs to achieve net-zero emissions by 2050, which means that global greenhouse gas emissions (including carbon dioxide and other greenhouse gases) must be significantly reduced, and the remaining emissions must be offset through carbon removal technologies or natural methods (such as forest absorption of CO2) to achieve a balance between emissions and removal. 

• Role: Net zero emissions by 2050 are the core goal of achieving long-term climate stability, aiming to avoid global temperature rise of more than 1.5°C, thereby avoiding increased extreme climate risks. 

1.3 the 1.5°C global warming target after the industrial revolution 

• Background : According to the Paris Agreement, in order to avoid the most severe effects of climate change, scientists have proposed that global temperature rise should be controlled to no more than 1.5°C (compared to pre-industrial levels). This goal is based on scientific research on the climate system, which believes that after exceeding 1.5°C, the effects of climate change will become more drastic and unpredictable. 

• Key point: If global temperatures rise by more than 1.5°C, there will be more extreme weather, sea level rise, glacier melting, and ecosystem collapse. Therefore, achieving net-zero emissions by 2050 is necessary to limit temperature rise. 

1.4. CO2 ppm (atmospheric carbon dioxide concentration) ppm 

• definition: ppm (parts per million) indicates the concentration of carbon dioxide in the atmosphere, i.e. how many of the molecules in the atmosphere are CO2 per million. Climate scientists believe that atmospheric CO2 concentrations should stabilize between 350 and 450 ppm to reach the 1.5°C target. 

• Correlation between CO2 ppm and temperature: The current global CO2 concentration is about 420 ppm, which is very close to the 1.5°C tipping point. As the concentration of CO2 in the atmosphere rises, the global temperature will also increase accordingly. Scientific studies have shown that if CO2 concentrations exceed 450 ppm, the likelihood of global warming exceeding 1.5°C will increase significantly. 

1.5. CO2 Emissions Tons and Carbon Budget 

• Carbon Budget: Carbon budget refers to the cumulative amount of CO2 that humans can emit while global warming does not exceed 1.5°C. According to the IPCC (United Nations Panel on Climate Change) report, our carbon budget is about 400 to 500 billion tons of CO2 from 2020. This means that we must reduce emissions within this carbon budget and achieve net-zero goals. 

• Correlation between tonnes of emissions and ppm: Every ton of CO2 emitted increases the concentration of CO2 in the atmosphere. For every 7.8 billion tons of CO2 added, atmospheric CO2 concentrations increase by 1 ppm. Therefore, if we emit 500 billion tons of CO2, the concentration of CO2 in the atmosphere will rise by about 64 ppm, which could lead to an increase in temperature by more than 1.5°C. 

1.6. Summary of Warming and Greenhouse Gas Key Points 

• The 2050 net-zero emission target is a core global strategy to avoid temperature rise above 1.5°C. If achieved, global carbon emissions and removal will be balanced by 2050, and we have the opportunity to limit global warming to 1.5°C.

•  The 1.5°C target requires that the concentration of CO2 in the atmosphere be stabilized at no more than 450 ppm. This means that we need to control total emissions of no more than 400 to 500 billion tons of CO2 after 2020. 

• The relationship between CO2 ppm and tons emitted shows that every 7.8 billion tons of CO2 emitted increases CO2 concentration by 1 ppm. Therefore, if we continue to emit a large amount of CO2 without effective emission reduction measures, CO2 ppm will grow rapidly, causing global temperatures to rise by more than 1.5°C. 

• The concentration of CO2 in the atmosphere (ppm) gradually drives global temperature rise as cumulative emissions increase. Maintaining a carbon budget of 1.5°C means that global emissions must be strictly capped and excess CO2 must be removed through technical and natural means. 

2. Global warming, climate risks, and net-zero perceptions 

As global climate change intensifies, governments, businesses, and international organizations are taking action to reduce greenhouse gas (GHG) emissions and address future climate risks. The United Nations' Paris Agreement, which aims to limit global warming to 1.5°C, poses significant challenges for businesses, especially in terms of effectively reducing carbon emissions and addressing increasingly stringent environmental regulations. The concept of Net-Zero has become a key word in current corporate strategies, referring to achieving carbon neutrality through emissions + removal = balance. However, many people still misunderstand the understanding of net zero, believing that net zero is about not emitting carbon at all or achieving zero emissions through simple carbon offsets. 

In addition, the challenges faced by companies include how to deal with misconceptions related to carbon concentration and warming targets. CO2 concentrations of 350 ppm to 450 ppm are considered to be the standard that can keep global temperature rise within safe limits (see chart CO2 Concentration vs. Global Temperature Rise). Within this range, the Earth's climate system is expected to be stable and not cause drastic climate change. Therefore, companies need to understand these scientific bases accurately to formulate appropriate response strategies and find development opportunities in policy changes. 

2.1 Chart of carbon dioxide concentration and global temperature rise (see Table 2.2, Figure 2.2, Table 2.2)

 This chart shows the direct correlation between atmospheric carbon dioxide (CO2) concentration and global temperature rise. As CO2 concentrations increase, so does the global average temperature, especially when carbon dioxide concentrations reach more than 450 ppm. This chart can be used to demonstrate the need for companies to set science-based targets (SBTis) and highlight their contribution to global carbon budgets. At the same time, it can also be used as a basis for enterprises to respond to carbon market pressures.

•  Science Basis: This chart highlights that in order to limit global warming below 1.5°C or 2°C, CO2 concentrations must be between 350 ppm and 450 ppm. This range is considered a "safe range" for climate change, and if it exceeds 450 ppm, it could lead to irreversible climate risks, including more frequent and intense extreme weather events. 

• Corporate Responses: According to the chart, companies need to actively reduce carbon emissions, especially in industries that directly affect CO2 concentrations, by reducing emissions from Scope 1, Scope 2, and Scope 3 (especially Scope 3, which is a symbol of a company's important position in the industrial chain and an important place to identify risk opportunities) to control global temperature rise. 

• Reduction space significance: Only through Scope 3 can we find out where the investment benefits are reduced, and Scope 2 is not only to obtain renewable energy, Scope 1 may not be able to recover through investment capital through active energy control. 

2.2 What is "Emissions + Removals = Balance"? 

"Emissions + Removal = Balance", also known as Net-Zero Emissions, refers to the total amount of greenhouse gases emitted by a company, country, or the world in a certain period of time equal to the total amount of greenhouse gases removed through various means, achieving the "net effect of zero emissions". This does not mean completely stopping all greenhouse gas emissions, but offsetting or removing the carbon emitted through various methods, such as carbon capture technology, afforestation, etc., to achieve zero net emissions. 

2.3 Why is "emissions + removal = balance" not "zero emissions"? 

• It is impossible to completely stop emissions: Even with high technological developments, certain industries (such as industrial manufacturing, aviation, agriculture) still have residual emissions that are difficult to completely eliminate. Therefore, it is actually difficult to achieve complete "zero emissions". That's why we need carbon removal technology to balance this residual emissions.

•  The role of removal techniques: Removal methods include natural carbon absorption processes (e.g., forests, wetlands) and artificial techniques (e.g., carbon capture and storage (CCS). These means help absorb carbon dioxide from the atmosphere, thereby offsetting residual carbon emissions. 

2.4 Quantification and Application of Balance 

• Quantification Goals: When we talk about "emissions + removal = balance", we are actually considering that the carbon concentration in the atmosphere remains within a safe range, such as 350-450 ppm. This means that our total emissions should not exceed the Earth's ability to absorb naturally or remove through technology. 

• Path to Achievement: Companies should adopt a two-pronged strategy to reduce and increase emissions to achieve net-zero goals: 

• Reduce emissions: Minimize carbon emissions in production and operations by improving energy efficiency, shifting to renewable energy, and transforming supply chains. 

• Increase removal: Offset residual emissions by investing in carbon capture technologies, participating in carbon offsetting projects (e.g., reforestation, forest protection), or purchasing carbon credits. 

2.5 Why do companies need to understand this balance?

 If companies can accurately understand the meaning of "emissions + removal = balance", they can: 

• Set scientific emission reduction targets: Companies can set their emission reduction progress based on global and regional carbon budgets, and formulate a net-zero path that is both feasible and in line with climate goals.

•  Invest in carbon removal technology reasonably: In the process of achieving net zero, companies may need to invest in carbon removal technology and carbon credits to compensate for residual emissions that are difficult to eliminate, thereby achieving an overall balance. 

• Responding to Policy Changes: Understanding the balance between emissions and removals can help companies better respond to changes in government policies, especially in carbon taxes, carbon markets, and carbon trading systems. 

2.6 Examples of Emissions and Removal Balance 

• Energy companies: Even if an energy company achieves efficient operations, it will still emit a certain amount of emissions. These companies can achieve "net-zero" goals by investing in carbon capture and storage technologies or participating in carbon credit markets to remove their residual emissions. 

• Manufacturing: High-carbon manufacturing industries can reduce emissions by reducing energy consumption, introducing cleaner technologies, and balancing emissions removal through reforestation projects or the purchase of carbon credits. 

"Emissions + Removal = Balance" is not a summary of "Zero Emissions"

 "Emissions + Removal = Balance" is the core concept of net zero emissions, which does not mean that companies stop emitting, but to achieve a balance by reducing emissions and increasing removals, and ultimately achieving control of climate change. Businesses must understand and apply this concept to effectively address climate risks amidst increasingly stringent policies and market requirements. 

3.1. Warming to 1.5°C and CO2 emission tonne caps, CO2 concentration caps per ppm? What are safety limits? When we discuss the 1.5°C target, CO2 emission tonne caps, and CO2 ppm concentration caps, these caps are set based on scientific models and predictions of climate change risks. Specifically, these caps are designed to prevent the continuous increase in atmospheric CO2 concentrations, leading to a global temperature rise of more than 1.5°C, which in turn triggers a series of irreversible climate change impacts. Why are there caps? The setting of 1.5°C, emission tonnage cap, and ppm concentration cap is mainly based on the following two reasons: 

3.1.1. Imbalance between global emissions and carbon removal 

• Emissions are greater than removal: In reality, human activities (such as fossil fuel burning, industrial production, and agriculture) emit billions of tons of carbon dioxide every year, and the natural carbon removal mechanisms in the atmosphere (such as carbon absorbed by forests and oceans) are far from sufficient to fully absorb these emissions. This phenomenon of emissions exceeding removal leads to a continuous increase in atmospheric CO2 concentrations. 

• Insufficient carbon sinks: The earth's natural carbon sinks (such as forests and oceans) have certain limits, and as the concentration of CO2 in the atmosphere increases, the absorption efficiency of natural carbon sinks will also weaken, making it impossible to maintain a balance with emissions. Therefore, unless humans take large-scale emission reduction measures and use technological means such as carbon capture and storage, atmospheric CO2 concentrations will continue to rise. 

3.1.2. Scientific Modeling and Risk 

• Assessment Predictions of Climate Models: Scientists have evaluated the impact of different concentrations of CO2 on global temperature through extensive climate model studies. According to the United Nations Panel on Climate Change (IPCC), when atmospheric CO2 concentrations exceed 450 ppm, the likelihood of global temperatures rising by more than 1.5°C will increase significantly. This concentration limit of 450 ppm, and the corresponding upper limit on tons of carbon dioxide emissions (about 400 to 500 billion tons), is to ensure that we have enough "safe space" to prevent the climate system from entering uncontrollable high-risk areas.

•  Safety Margin: The concept of a carbon budget is like setting up a "safe space" for the world, where cumulative emissions can still maintain a manageable temperature rise. This "safe space" is based on scientists' understanding of the relationship between carbon emissions and climate change. If we continue to emit CO2 in large quantities in the coming decades without achieving rapid reductions and increased carbon removal, this safe space will be quickly depleted.

 Specific figures of the upper limit:

 3.1.3. Upper limit of carbon dioxide emission tons of the global average temperature 1.5°C warming target: (Figure 3.1.3. K-line chart of global warming and CO2 billion tons equivalent) 

• According to scientific research, if the temperature rise is to be controlled within 1.5°C, the total cumulative carbon dioxide emissions from 2020 need to be limited to about 400 to 500 billion tons. This is what we call the carbon budget cap, and any emissions above this budget increase the risk of warming by more than 1.5°C. 

3.1.4. Post-Industrial Revolution 1.5°C warming target and upper limit of CO2 ppm concentration (refer to Figure 3.1.4. K-line chart of the relationship between upper ppm concentration and warming): 

• According to climate models, when the concentration of carbon dioxide in the atmosphere reaches 450 ppm, the risk of global temperature rise exceeding 1.5°C increases significantly. Therefore, 450 ppm is considered the upper limit we need to maintain when avoiding extreme climate risks. 

Why are emissions and ppm caps set? 

Because global emissions are far greater than carbon removals, and the Earth's natural carbon sink system cannot absorb these excess emissions, it is necessary to set a cap. The specific reasons are as follows: 

• Control atmospheric CO2 concentration: Atmospheric CO2 concentration is the main factor affecting global temperature. If carbon dioxide concentrations continue to rise, it will push the temperature to rise by more than 1.5°C. This will not only trigger more frequent extreme weather events but also exacerbate phenomena such as sea level rise and glacier melting, causing irreversible damage to ecosystems and human society. 

• Avoid exceeding tipping points: Scientists believe that when global warming exceeds 1.5°C, it may trigger tipping points in the climate system, such as melting permafrost or the disappearance of tropical rainforests, which can further accelerate climate change, making future emission reduction or carbon removal measures unable to reverse these impacts.

 With global emissions far greater than carbon removals, we face significant pressure to emission our emissions. Therefore, in order to achieve the goal of no more than 1.5°C of temperature rise, scientists have set an upper limit on tons of emissions (about 400 to 500 billion tons of CO2) and an upper limit on the concentration of CO2 ppm in the atmosphere (about 450 ppm) based on climate models. These caps are intended to strike a balance between reducing emissions and increasing carbon removal, and to leave some "safe space" to prevent the global climate system from entering an irreversible danger zone. 

3.1.5. Impact and change of tons of carbon dioxide emissions: (Refer to Figure 3.1.5. Warming scenario of changes in total atmospheric carbon dioxide) In the discussion of global climate change and carbon budgets, 350 Gt CO2, 400 Gt CO2, 450 Gt CO2, and 500 Gt CO2 These figures represent the total key carbon emissions and are closely related to the different risk stages that limit global temperature rise. Here's a detailed discussion of the specific meaning and basis of these figures: 

1. 350 Gt CO2 

• Significance: 350 Gt CO2 is considered a "safe upper limit". This is the cumulative carbon dioxide emissions corresponding to the global temperature rise of about 1°C. This number represents the "optimal range" that scientists believe can avoid extreme climate risks, especially for ecosystems, where temperature changes will keep many species and environments in relatively safe areas. 

• Data source: 350 ppm is a safety threshold proposed by climatologist James Hansen and others, and its predictions related to CO2 emissions come from research by the United Nations Panel on Climate Change (IPCC). According to the IPCC Sixth Assessment Report, cumulative emissions of 350 Gt CO2 are one of the scenarios for achieving a lower temperature rise (1°C). 

2. 400 Gt CO2 

• Significance: 400 Gt CO2 is a critical figure in the carbon budget related to the 1.5°C warming target. If the cumulative total amount of carbon dioxide emitted by humans does not exceed 400 Gt, there is a relatively high probability of controlling global temperature rise to 1.5°C, thereby reducing the risk of extreme climate change.

•  Data source: This figure comes from data modelling in the IPCC Sixth Assessment Report (AR6), especially calculated under its "global warming of no more than 1.5°C" scenario. Research in the AR6 report shows that in order to achieve the 1.5°C target, the world will be able to emit about 400 billion tons of carbon dioxide from 2020.

3. 450 Gt CO2 

• Significance: 450 Gt CO2 is considered the "critical upper limit" of the carbon budget. If cumulative global emissions reach 450 Gt CO2, the risk of global temperature rise of more than 1.5°C will increase dramatically. This means that emitting more than 450 Gt CO2 could have more severe climate consequences and trigger hard-to-reverse changes in the climate system, such as melting permafrost or rapid sea level rise. 

• Data source: This data comes from the IPCC and multiple international climate science models. According to the IPCC report, 450 Gt CO2 is an important tipping point in the climate system, beyond which global temperatures will most likely rise to more than 1.5°C. 

4. 500 Gt CO2 

• Meaning: 500 Gt CO2 is the "limit limit" of the carbon budget. If cumulative global carbon dioxide emissions reach or exceed 500 Gt, global temperatures will almost certainly exceed the 1.5°C target, and this will have serious, irreversible consequences of climate change, including more frequent and severe extreme weather events, rising sea levels, accelerated glacier melting, etc. Above 500 Gt CO2, the consequences of global warming will become extremely uncontrollable, and tipping points in the climate system may be triggered. 

• Data source: This figure also comes from the IPCC Sixth Assessment Report, where 500 Gt CO2 is the limit limit for achieving the 1.5°C target. If cumulative emissions reach 500 Gt CO2, the risk of global warming will increase dramatically and move into high-risk areas. 

Arguments for data sources 

All these figures and projections come from the scientific reports of the United Nations Panel on Climate Change (IPCC), in particular the modeling and scientific analysis of multiple climate scenarios in the Sixth Assessment Report (AR6). These reports calculate different carbon budgets based on different global emission pathways and climate models, and derive the cumulative emission limits required to achieve targets such as 1.5°C and 2°C based on probability. 

Summary 

• 350 Gt CO2: It is a relatively "safe" emission limit, corresponding to a temperature increase of about 1°C. 

• 400 Gt CO2: This is the cumulative emission limit with a high probability of achieving 1.5°C warming control. 

• 450 Gt CO2: is the "tipping point" of 1.5°C, exceeding this number will significantly increase the risk of exceeding 1.5°C. 

• 500 Gt CO2: is the "limit limit" to achieve the 1.5°C target, beyond which the global temperature is almost certain to exceed 1.5°C. 

All these data and conclusions are based on detailed analysis and predictions of different greenhouse gas emission scenarios in the IPCC report, which is internationally recognized as the basis of climate science. 

3.1.6. United Nations IPCC Committee and Carbon Budget 

The IPCC (Intergovernmental Panel on Climate Change) is an organization jointly established by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988. The IPCC's primary mission is to assess and bring together global scientific research on climate change to provide science-based information to global policymakers. The IPCC itself does not conduct original research, but publishes a comprehensive assessment report based on existing scientific research, climate models, data analysis, etc., summarizing the current situation, future forecasts and response strategies of global climate change. 

Relationship between IPCC and Carbon Budget 

Carbon budget is a key concept in the IPCC report, which refers to the total amount of carbon dioxide that humans can cumulatively emit to achieve specific global temperature rise targets (such as 1.5°C or 2°C). 

3.1.7. The concept of carbon budget (Table 3.1.7. Key influencing factors of carbon budget)

•  Carbon budget refers to the total amount of carbon dioxide emissions that can be cumulatively emitted globally to achieve specific temperature rise targets (such as 1.5°C or 2°C). This concept is calculated based on the correlation between atmospheric carbon dioxide concentrations and rising temperatures. 

• Background of the carbon budget: According to the IPCC's climate model, cumulative global greenhouse gas emissions directly affect the concentration of carbon dioxide in the atmosphere, which in turn drives global temperature increase. Therefore, the carbon budget provides an important reference data for us in the process of climate warming, helping us understand how much carbon dioxide can be emitted if global warming is to be controlled to 1.5°C or 2°C. 

3.1.8. How does the IPCC calculate the carbon budget?

•  Data Sources and Models: The IPCC's report is based on multiple global climate models that take into account human activities, natural system responses, and future emissions pathways. The IPCC calculates the risk of temperature rise under different greenhouse gas concentration conditions by analyzing dozens of different emission scenarios, thereby deriving the cumulative emissions that can be tolerated globally. 

• Uncertainty: The calculation of carbon budgets also takes into account various uncertainties, such as the sensitivity of the climate system (i.e., the speed and extent of global temperature response to greenhouse gas concentrations), non-carbon dioxide greenhouse gases in the atmosphere (such as methane and nitrous oxide), and natural carbon sinks (such as the ability of forests and oceans to absorb carbon). 

3.1.9. Key data points in IPCC data 

Differences between 1.5°C and 2°C targets: 

• 1.5°C target: To achieve the goal of global warming no more than 1.5°C, the IPCC estimates that from 2020, the world will only emit about 400 billion to 500 billion tons of CO2. This goal is very challenging because the current state of human activity suggests that emissions are about 360 billion tons per year, which means that the remaining carbon budget may be exhausted in 10 to 15 years. 

• 2°C target: If global temperatures rise to 2°C, the IPCC estimates that more CO2 could be emitted, about 1 trillion tons of CO2, but this would have more severe climate impacts, especially on ecosystems, sea level rise and the frequency of extreme weather. 

3.1.10. Consequences of rising temperatures 

IPCC data describe in detail the impacts of global climate change under different temperature increases, in particular:

 1.5°C vs 2°C warming: 

• 1.5°C warming: will make extreme weather events (such as droughts, floods, heat waves, etc.) more frequent in most parts of the world, and exacerbate glacier melting and sea level rise. However, under this goal, many ecosystems and low-lying areas still have high adaptation possibilities. 

• 2°C Warming: If global temperatures rise to 2°C, the consequences of climate change will be significantly exacerbated. Many low-lying areas will face greater threats of sea level rise, parts of ecosystems (such as coral reefs) will disappear completely, and the frequency and intensity of extreme weather events will increase significantly. The IPCC emphasizes that the impact of 2°C significantly increases the irreversible consequences of climate change compared to 1.5°C.

 3.1.11. Non-CO2 factors 

• While carbon budgets primarily focus on carbon dioxide (CO2), the IPCC emphasizes that other greenhouse gases such as methane and nitrous oxide also have a significant impact on global warming. The emission and elimination of these gases must also be taken into account to ensure that the 1.5°C target is achieved. 

• Nonlinear reactions in the climate system: The IPCC model also considers nonlinear reactions in the climate system, such as tipping points, which means that once the climate system exceeds certain limits, it will lead to irreversible changes, such as the melting of permafrost, which will release large amounts of methane, accelerating global warming. 

3.1.12. How do IPCC data guide policy decisions? 

• IPCC data and reports provide a scientific basis for countries around the world to formulate climate policies, especially the commitments in the Paris Agreement. According to the IPCC's recommendations, countries need to set specific emission reduction pathways and achieve net zero emissions by 2050, that is, emissions are balanced with carbon removals.

•  Strategies to reduce carbon emissions: The IPCC emphasizes that to achieve the 1.5°C target, countries must rapidly and massively reduce the use of fossil fuels, promote renewable energy, improve energy efficiency, promote carbon capture and storage technologies (CCS), and protect and restore natural carbon sinks (such as forests and wetlands).

 IPCC data and reports provide detailed carbon budgets and climate change risk assessments, pointing out that if the world wants to control temperature rise to 1.5°C, it is necessary to strictly control carbon emissions and rapidly reduce annual CO2 emissions. These scientific data provide guidance for climate policies and emission reduction actions in countries around the world. The carbon budget is not just a number, but a ceiling that the world needs to adhere to collectively to avoid the worst consequences of climate change. 

3.2 What damage or encounters will there be if global warming exceeds 1.5°C or 2.0°C? 

When global temperatures rise by more than 1.5°C or 2.0°C, extreme weather events will have a huge impact on the human economic system, such as hurricanes and typhoons will become more frequent and intense. These extreme storms will bring significant disasters to coastal cities and island areas, especially sea level rise and extreme rainfall will make them even more destructive. In particular, it is reflected in physical damage, industrial chain destruction, and raw material price fluctuations. These damages involve the operation of economic systems, physical property, crop and food production, and other areas of the economy. The following is a detailed analysis: (See Table 3.2. Examples of climate-related economic losses)

 In the near and medium term (around 2030 to 2050), 

when global temperatures rise close to 1.5°C, the following problems will begin to change significantly and gradually worsen in the short term. 

3.2.1. Increased extreme weather events and 

• increased heat waves: The frequency and intensity of high temperature heat waves will increase significantly, especially in tropical and subtropical regions. This will pose significant challenges to public health, agriculture, and infrastructure, especially in developing countries. 

• Floods and Heavy Rains: Precipitation patterns will become more extreme due to increased water vapor levels in the atmosphere, leading to frequent heavy rains and floods that threaten coastal cities and farmland. 

• Increased drought: Some regions will face longer and more severe droughts, especially in water-scarce regions such as Africa, the Middle East, and South Asia, where agriculture and food security will face significant challenges. 

• Hurricanes and Typhoons: As temperatures rise, the intensity of hurricanes and typhoons will increase significantly. Increased ocean surface temperatures will provide more energy to these storms, leading to faster winds, more intense rainfall, and potentially more extensive damage. Coastal cities and island nations will face a more severe risk of storm surges and flooding. 

3.2.2. Accelerating sea level rise 

• Even if the temperature rises by only 1.5°C, the rate of sea level rise will accelerate significantly. Melting ice sheets and thermal expansion of the ocean will cause coastal areas, island countries and low-lying areas to experience frequent flood threats. 

• Coastal city erosion: Many coastal cities will face coastline regression and unstable foundations, which will gradually worsen over the next few decades. 

3.2.3. Species extinction and ecosystem collapse 

• Global temperature rise of more than 1.5°C will make it impossible for many species to adapt, especially coral reef ecosystems. More than 90% of tropical coral reefs may disappear when temperatures rise above 1.5°C, which will seriously affect global fisheries and marine biodiversity. 

• Increased forest fires: Rising temperatures and droughts will increase forest fires worldwide, especially in regions such as the Amazon rainforest and Australia, which will further exacerbate carbon emissions. 

In the medium term (around 2050), 

as global temperatures approach or exceed 2°C, damage and risks will deteriorate significantly, with systemic and irreversible impacts. 

3.2.4. Food security crisis 

• Crop yield reduction: Production of major global food crops such as wheat, corn, rice, and soybeans will decrease significantly due to rising temperatures and droughts. Especially in developing countries, this will exacerbate food insecurity and lead to more frequent food shortages. 

• Water scarcity: Water scarcity will become more serious in the medium term, especially in South Asia, the Middle East and Africa, which will further affect agricultural irrigation and water for human purposes. 

3.2.5. Social and economic instability

•  Climate refugees: As climate conditions worsen, especially sea level rise and extreme weather are frequent, tens of millions or even hundreds of millions of people are expected to be forced to relocate. This will exacerbate global social and political instability. 

• Economic losses: According to World Bank estimates, a rise in global temperature of more than 2°C will reduce global GDP by trillions of dollars. In particular, agriculture-dependent economies and developing countries will be the most affected.

•  Increased economic losses from hurricanes and typhoons: Stronger hurricanes and typhoons will cause greater damage to infrastructure, buildings, and agriculture, causing huge economic losses, especially in developing countries and island countries that lack adaptation and mitigation capabilities. 

3.2.6 Health Crisis 

• Heat-related Diseases: As temperatures rise, heatwave-related health problems such as heat stroke, cardiovascular disease, and respiratory diseases will increase significantly, especially in high-density urban areas.

•  Spread of infectious diseases: A warm climate will create a more favorable environment for mosquito-borne diseases (e.g., malaria, dengue) and make the spread of infectious diseases more challenging. 

In the long term (after 2100), 

if the global temperature rises by more than 2°C, it will enter a phase of irreversible climate change, with more serious and long-term consequences. 

3.3.7. Total ecosystem collapse 

• Coral reef wipeout: A warming of more than 2°C will lead to the disappearance of almost all tropical coral reefs and completely destroy the ecosystems and fisheries livelihoods that depend on the coral reefs. 

• Mass species extinction: Most species will not be able to adapt to such drastic climate change, leading to a significant reduction in biodiversity on a global scale and a significant weakening of ecosystem functions. 

3.3.8 Complete melting of glaciers and polar ice sheets 

• Greenland and Antarctic ice sheets: After a temperature rise of more than 2°C, the melting rate of the Greenland and Antarctic ice sheets will accelerate, eventually causing global sea levels to rise by several meters. This will make coastal cities and lowland countries uninhabitable for millions of people.

•  Permafrost Melting: The melting of permafrost will release large amounts of methane and carbon dioxide, further exacerbating the greenhouse effect and creating a self-reinforcing climate degradation cycle. 

3.3.9 Irreversible Climate Change 

• The "tipping point" of the climate system: Global warming above 2°C will trigger a series of tipping points of the climate system (such as the collapse of the Amazon rainforest, changes in ocean circulation, etc.), which will be irreversible and may lead to further global warming beyond human control. 

When global temperatures rise above 1.5°C or 2°C, extreme weather events, such as hurricanes and typhoons, will become more frequent and intense, leading to severe floods and storm surges. In the short term, heat waves, droughts, heavy rains and extreme storms will threaten human health and property; In the medium term, the problems of food security, economic instability and climate refugees will become increasingly prominent; In the long term, it will enter a stage of irreversible climate change, the ecosystem will collapse, and global risks will intensify. 

3.4. What are the specific cases of industrial profit losses caused by extreme weather scenarios? 

A global temperature rise of more than 1.5°C or 2.0°C will trigger various extreme weather events, from hurricanes, heavy rains, droughts to extremely hot weather, etc., which will cause huge financial losses to the economic system. The following are examples of specific economic damages in different scenarios: (See Table 3.4: Specific examples of climate-related risk industries) 

3.4.1. Damage to insurance industry and property by typhoons and extreme rainfall 

Case 1: Insurance companies face huge compensation due to sudden heavy rains and floods 

• As the climate warms, the behavior of typhoons becomes unpredictable, especially when extreme rainfall becomes more frequent in a short period of time. For example, some areas have not been flooded on a large scale before, but suddenly when a typhoon hits, there is a short period of heavy rain, causing flooding. This anomaly caused a large number of residential, commercial buildings and vehicles to be damaged by water.

•  Insurance industry losses: For example, in a certain area, a large number of insurance companies need to compensate for insurance claims for cars, homes and businesses during a sudden rainstorm. Because these areas are not traditional high-risk areas for flooding, insurers' predictions lead to huge payouts, significantly impacting their profitability. 

• Specific example: In 2017, Typhoon Hato hit Hong Kong and Macau with greater intensity than expected, causing widespread flooding caused by heavy rains, and insurance companies had to pay a large number of property insurance claims. 

3.4.2. Impact of extreme weather on the financial and banking industry 

Case 2: Extreme weather events such as typhoons, floods, forest fires, etc., which may damage the company's production facilities, supply chain, and market demand due to 

• extreme weather events such as typhoons, floods, forest fires, etc., resulting in a sharp drop in corporate revenue. For example, a manufacturing company located in a coastal area was unable to deliver on time due to typhoon flooding, resulting in a significant decrease in revenue. 

• Bank loss: As a result, the business was unable to repay its loan to the bank on time and became a bad debt. Banks may face large-scale loan overdue problems, especially when multiple companies are affected by extreme weather events at the same time, and the risk of bad debts increases for banks. Specific example: In 2011, large-scale floods occurred in Thailand, many factories were shut down, and enterprises had difficulty in flowing funds, resulting in loans being unable to be repaid, and banks were at risk of bad debts. 

3.4.3. Damage to the construction and engineering industry by extreme weather 

Case 3: Extreme weather such as extreme heat causes construction site shutdowns 

• When the temperature rises extremely, workers cannot work outdoors, especially when the temperature exceeds 40°C, which poses serious health risks. In addition, high temperatures can affect the normal operation of engineering equipment, delaying the construction period. 

• Construction Industry Losses: Due to delays in project schedules, project developers and contractors need to pay more wages to make up for the extended construction period, as well as deal with risks posed by fluctuations in material costs and changes in market demand. In this case, the engineering company may suffer operating losses or even face a cash flow crisis. 

• Specific example: In 2019, many European countries encountered extreme heat, with temperatures exceeding 45°C in some areas, and many construction sites were forced to shut down, resulting in serious delays in construction progress and a decline in the output value of the construction industry. 

3.4.4 Agricultural and food supply chain damage 

case 4: Drought and extreme heat lead to reduced crop yields, driving up food prices 

• Extreme drought or hot weather can deteriorate the agricultural production environment. For example, droughts cut irrigation water for crops, or high temperatures expose crops to heat stress, leading to significant yield drops, which can have a significant impact on food supply and prices. 

• Rising Food Prices: Due to reduced supply, the prices of major agricultural products such as wheat, corn, soybeans, etc. will rise, pushing up global food prices. This not only affects consumers but also affects the cost structure of the food processing industry and retail industry, ultimately leading to food price inflation. 

• Specific example: In 2020, Australia suffered a large-scale drought, causing wheat production to plummet, causing global wheat prices to rise, and affecting the chain reaction of food prices such as flour and bread.

 3.4.5. Supply Chain Disruptions and Raw Material Price Fluctuations 

Case 5: Extreme weather events such as typhoons disrupt global supply chains, driving up raw material prices 

• Global supply chains are highly dependent on regional manufacturing hubs, which are vulnerable to extreme weather events. For example, typhoons or floods can damage ports, transportation networks, and delay the transportation of critical components and raw materials, affecting global manufacturing. 

• Raw Material Price Fluctuations: When supply chains are disrupted, the supply of certain key raw materials such as steel, semiconductors, plastics, etc. is insufficient, leading to significant price fluctuations. This fluctuation can further drive up product prices, affecting production costs in downstream industries.

•  Specific example: In 2011, the Great Tohoku Earthquake in Japan triggered a tsunami that hit Japan's semiconductor industry, disrupting the global semiconductor supply chain, driving up the price of electronic products sharply and affecting the automotive industry. 

3.4.6. Examples of other financial damage effects 

Case 6: Damage to tourism and hospitality industries by extreme weather 

• Hurricanes and typhoons can severely hit the tourism industry, especially in countries that rely on beaches, islands, and coastal tourism. For example, a hurricane can destroy resort facilities, hotels, and infrastructure, leading to disruptions in tourism activities.

•  Economic Losses: This will directly affect the revenue of tourism-related businesses and cause a large number of cancellations of travel bookings, further affecting catering, transportation, and other related industries.

•  Specific example: In 2017, Hurricane Maria hit the Caribbean, destroying several resorts and leaving the local tourism industry unable to recover for several years, costing billions of dollars. 

The financial losses of extreme weather to economies range widely, spanning insurance, banking, construction, agriculture, and supply chains. These damages include property damage, insurance claims costs, business shutdowns and inability to repay loans, delays in construction periods, and rising food prices, causing lasting damage and pressure on the overall economic system. Therefore, businesses and governments should strengthen the management of extreme climate risks and improve the resilience and resilience of economic systems to reduce the impact of these damages. 

3.5. Which industries are most vulnerable to extreme weather? Extreme weather or climate change affects different industries to varying degrees, with some industries being most vulnerable to them due to their high dependence on climatic conditions or exposure to the risk of natural disasters. Here's an analysis of key industries that are particularly vulnerable to extreme climate change: 

3.5.1. Agriculture and Fisheries 

• Climate Vulnerability: Agriculture is highly dependent on temperature, precipitation, and climate stability. Extreme weather events such as droughts, floods, hurricanes, and extreme heat can directly affect crop growth, harvest, and livestock production conditions. 

• Extreme Heat: High temperatures can affect crop growth stages, leading to reduced yields. Livestock can also suffer from heat stress due to high temperatures, affecting production efficiency. 

• Drought and flooding: Prolonged drought can cause irrigation difficulties and reduce food production; Floods can damage farmland, wash away nutrients, and pollute water sources. 

• Increased Pests and Diseases: Changes in temperature and humidity can also increase the risk of pests and diseases, posing a threat to agricultural production. 

• Impact on Fisheries: As ocean temperatures rise, fisheries are also significantly impacted. The disappearance of coral reefs will lead to the collapse of marine ecosystems, affecting the fish that depend on them. Seawater acidification and overfishing will further exacerbate the vulnerability of fisheries. 

3.5.2. Insurance Industry 

• Climate Vulnerability: The insurance industry is particularly sensitive to climate extremes, especially property and casualty insurance companies. With the increase in frequency and intensity of extreme weather events such as hurricanes, droughts, floods, and forest fires, the risk of payouts faced by insurance companies has increased significantly. 

• Property and agricultural insurance: Property damage and crop damage caused by typhoons and floods can increase the pressure on insurance claims, and many insurance companies have to raise premiums to cope with the increasing number of claims. 

• Reinsurance risks: Reinsurers are also affected by extreme weather events, especially when these events occur in multiple regions at the same time, which can lead to significant cumulative losses and increase systemic risks in the insurance industry.

 3.5.3. the energy sector: 

• Climate vulnerability :the energy sector, especially fossil fuel production and power generation, is highly vulnerable to climate extremes. 

• Damage to Power Generation Facilities: Extreme weather events such as floods, storms, and heatwaves can damage energy infrastructure, including transmission networks, power plants, and oil and gas production facilities. 

• Impact of Hydropower: Extreme droughts can lower reservoir levels, affecting hydropower generation, which is particularly severe in countries that rely on hydropower. 

• Volatility of Wind and Solar: While renewable energy is an important means of combating climate change, wind and solar energy can also be affected by extreme weather, such as extremely low wind speeds or high temperatures leading to reduced efficiency.

 3.5.4.in tourism: 

•  Climate vulnerability :The tourism industry is highly vulnerable to extreme weather events due to its reliance on stable climatic conditions and natural resources. 

• Coastal Tourism: Typhoons, tsunamis, and rising sea levels threaten beaches and island tourist destinations, where tourism infrastructure may be disrupted, affecting tourism revenue. 

• Alpine Ski Tourism: As temperatures rise, snow cover decreases in alpine areas, impacting ski resort operations and revenue. 

• Impact of ecotourism: As extreme weather disrupts ecosystems, ecotourism areas become less attractive, especially ecosystems such as coral reefs and rainforests, leading to a decline in tourism revenue. 

3.5.5. Building and Infrastructure 

• Climate Vulnerability: The construction industry and infrastructure are highly sensitive to the impact of extreme weather events. 

• Typhoon and flood damage: Infrastructure such as roads, bridges, and drainage systems can be directly damaged by typhoons and floods, and building structures are also susceptible to damage during extreme events.

•  Impact of Extreme Heat and Drought: Extreme heat can affect the progress of construction sites, with workers unable to work due to extreme heat, leading to delays in construction periods. In addition, drought can affect the maintenance of building materials such as concrete, which in turn affects the quality of construction.

•  Construction shutdowns: For example, heat waves that make construction sites unable to operate or severe storms that prevent construction equipment from functioning properly can increase costs and reduce revenue in the construction industry. 

3.5.6.  water resources and public services :

•  Climate vulnerability: Water resources management and public services are particularly vulnerable to extreme weather events. 

• Drought leads to water shortages: Prolonged droughts reduce reservoir water storage, leading to drinking water shortages and insufficient industrial water, affecting water supply company operations and increasing water supply costs.

•  Impact of Floods on Water Supply and Drainage Systems: Floods can contaminate drinking water sources and disrupt drainage facilities, posing challenges to public services in cities and increasing pressure on infrastructure maintenance and renewal. 

3.5.7. Manufacturing and Supply Chain Management 

• Climate vulnerability: The manufacturing industry is highly dependent on stable supply chains, and extreme weather events often lead to supply chain disruptions. 

• Disruption of Component Supply: Manufacturing companies require parts from around the world, and hurricanes and floods can cause transportation disruptions, affecting the entire production schedule and causing factory shutdowns. 

• Raw Material Price Fluctuations: Extreme weather events can disrupt the production and supply of critical materials (such as metals, oil, chemicals), leading to sharp price fluctuations and increasing manufacturing costs. 

3.5.8. in food processing and retail : 

• Climate vulnerability:the food processing and retail industries rely on a steady supply of agricultural products, so extreme weather events can significantly impact this industry.

•  Agricultural Supply Shortages: Droughts, floods, and hurricanes affect agricultural harvests, causing the food processing industry to face raw material shortages and affecting production. 

• Food price fluctuations: Rising food prices can be passed on to food processing and retail, ultimately increasing consumer purchase costs and weakening demand, thereby affecting corporate profitability. 

The industries most vulnerable to extreme weather include agriculture and fisheries, insurance, energy, tourism, construction and infrastructure, water and public services, manufacturing and supply chain management, and food processing and retail. These industries are directly or indirectly dependent on stable climate conditions, and the frequent occurrence of extreme weather will increase their operating costs, affect revenue stability, and increase financial risks. Therefore, these industries need to adopt proactive adaptation measures, such as strengthening climate risk management, investing in infrastructure resilience, and diversifying supply chains to cope with more frequent and severe extreme weather events in the future. 

3.6. Global low-carbon/net-zero policies/strategies/solutions? (It is inevitable to list only the main content) 

The promotion of global low-carbon and net-zero policies involves multi-level international, regional, and national agreements, policies, taxation, and trading systems, each with its own focus, but many global solutions are still in transition and need to be negotiated through transitional periods, treaties, countries, or participating initiative members. Describe the main content of global low-carbon/net-zero emission policies. The following is a detailed explanation of the integration of mainstream systems and solutions, covering key policies, strategies, and solutions, combined with carbon taxes, ETS (Emissions Trading System), and relevant measures in various countries. 

Overview of the Global Low-Carbon/Net-Zero Policy Framework (see Table 3.6. Global International Policies, Institutions, Frameworks, and Treaty Schemes for Global Response to Climate Change) 

The overall framework of global climate policy revolves around the core goal of reducing greenhouse gas emissions and attempts to limit global temperature rise to within 1.5°C to 2°C. Key policy tools include international agreements, regional policies, carbon pricing mechanisms (such as carbon taxes and emissions trading systems (ETS), and specific emission reduction action plans for different industries and regions. These policies and strategies complement each other and aim to promote emission reduction through market mechanisms, financial instruments, technical support, and global cooperation. 

3.6.1. Policies at the international level 

(1)  the Paris Agreement :

• Background :the Paris Agreement, adopted in 2015, is the main framework for the global response to climate change, aiming to limit global temperature rise to no more than 2°C and strive to limit the increase to 1.5°C. 

• Emission reduction strategy: Each party formulates Nationally Determined Contributions (NDCs) to continuously raise emission reduction targets and ultimately achieve net-zero emissions by 2050. Countries are required to report on progress and reassess and increase their emission reduction commitments every five years. 

• Specific measures: 

• Nationally Determined Contributions (NDCs): Emission reduction targets set by countries are at the core of the Paris Agreement.

•  International Cooperation and Technology Transfer: Provide financial and technical support to developing countries to promote clean energy development. 

(2) Background of the United Nations Climate Change Conference (COP): 

• Background :the annual Conference of the Parties (COP) is the main platform for global policy formulation and consultation on climate change.

•  Key results: 

• COP26 (Glasgow): Countries pledged to accelerate the phase-out of coal and strengthen financial support for climate-vulnerable countries. 

• COP27 (Egypt): Focused on climate loss and damage and strengthened financial commitments to aid to developing countries. 

3.6.2. Policies at the regional and national level 

(1) The EU's European Green Deal 

• target: to achieve carbon neutrality by 2050. 

• Core Policy: 

• Carbon Border Adjustment Mechanism (CBAM): Impose a carbon tax on imports of high-carbon emission products to prevent carbon leakage. 

• EU ETS: The EU ETS is the world's largest carbon market, covering the electricity, industry, and aviation industries, and reduces allowances year by year.

 (2) China's carbon peaking and carbon neutrality 

• goals : to peak carbon emissions by 2030 and achieve carbon neutrality by 2060. 

• Key Policies: 

• National Carbon Emissions Trading Market (ETS): Launched in 2021, it initially covers the power sector and will expand to more high-emission industries in the future. 

• Renewable Energy Development: China is the world's largest producer of solar and wind energy and actively promotes nuclear and hydrogen energy technologies. 

(3) U.S. climate policy 

• goal: achieve carbon neutrality by 2050. 

• Key policy tools: 

• The Biden administration returns to the Paris Agreement: rejoins global emission reduction actions and has developed a specific climate action plan.

•  Inflation Reduction Act (IRA, 2022): Large-scale clean energy investments, including electric vehicle subsidies, clean energy infrastructure construction, and support for carbon capture technologies. 

(4)Taiwan's carbon fee system : 

•  Background :Taiwan promotes carbon fees as one of the core tools for carbon pricing, supporting its 2050 net-zero emission goal. 

• Policy Framework: 

• Carbon Fee Collection: Targeting high-emitting companies to encourage them to reduce emissions and invest in clean technologies. 

• Climate Change Response Act: The legal framework regulates the carbon fee mechanism and emphasizes that carbon fee revenue is used to support the energy transition. 

3.6.3. Carbon Pricing Mechanism: ETS and Carbon Tax

 (1) Emissions Trading System (ETS) 

• Definition: ETS is a market mechanism where governments set total emission caps and companies trade based on emission rights to achieve emission reduction targets. 

• Key implementing countries: 

• EU ETS: The world's largest carbon market, gradually reducing total emission allowances every year, with plans to expand to more industries. 

• China ETS: Launched in 2021, it initially covers the power industry and will expand to the industrial and chemical industries in the future. 

• California Carbon Market: The United States does not have a national ETS, but California and several northeastern states have local carbon markets. 

• How it works:

•  Quota issuance and trading: Companies trade excess or insufficient emissions based on emission allowances, promoting technological innovation and reducing carbon emissions.

 (2) of carbon tax:

• Definition: A carbon tax is a tax on greenhouse gas emissions per unit, directly transmitting carbon price signals to companies to encourage them to reduce emissions.

•  Main implementing countries: 

• Sweden: The country with the highest carbon tax in the world, with a levy of about 137 euros per ton of carbon, greatly promoting the development of renewable energy. 

• Canada: A national carbon tax will be implemented in 2019 and plans to gradually increase to $170 per ton. 

• Taiwan Carbon Fee: Taiwan does not implement a carbon tax, but it has introduced a carbon fee system, which is mainly levied on high-emitting companies. 

3.6.4. International Net Zero Initiative and Cooperation 

(1) Science Based Targets initiative (SBTi)

•  Goals: Help companies set science-based and consistent emission reduction targets, ensuring that corporate actions align with the global 1.5°C climate target. 

• Participants: Hundreds of companies around the world have joined the SBTi, pledging to develop long-term emissions reduction plans. 

(2)  the Race to Zero initiative : 

• Background:The "Race to Zero" initiative promoted by the United Nations aims to encourage global businesses, cities, and financial institutions to achieve net-zero emissions by 2050. 

• Measures: Participants commit to developing specific action plans for emission reduction and increasing the strength of their commitments through continuous monitoring. 

(3) RE100 Initiative 

• Goal: Global companies commit to using 100% renewable energy, promoting clean energy procurement, and reducing carbon footprint.

 (4) C40 Cities Climate Leadership Group

•  Goals: The Global Cities Network is committed to achieving net-zero emissions by 2050 and promoting emission reductions through city policies, such as electric vehicle promotion, public transportation reform, and clean energy projects. 

Global low-carbon and net-zero policies are integrated into multiple international agreements, regional policies, carbon pricing mechanisms (such as carbon taxes and ETS), and international initiatives to provide specific frameworks for emission reduction actions for different industries and countries. These strategies address emissions issues at different levels and sectors around the world, from the international level to the regional and national levels, to specific enterprises and industries, and build a multi-level and comprehensive policy framework to support the global achievement of net-zero emissions goals. The following is a continuation of the summary and emphasis on key points: 

3.6.5. Comprehensive Solution: Multi-level Action Framework

 (1) Coordinated Development of Global Carbon Pricing Mechanisms Combination 

•  Carbon Tax and ETS: Different countries around the world have adopted carbon taxes and emissions trading systems (ETS), and some countries have even implemented both. For example, Canada has implemented both carbon taxes and carbon trading systems, allowing high-emitting companies to face fixed taxes while also having a market-driven emissions trading system. This hybrid carbon pricing mechanism can provide companies with more flexibility in reducing emissions. 

• Carbon Border Adjustment Mechanism (CBAM): In addition to its emissions trading system, the EU has proposed a carbon border adjustment mechanism to impose a carbon tax on imported products, ensuring that products in external markets adhere to the same environmental standards and prevent "carbon leakage." This measure has gradually attracted the attention of other countries and has become a key part of global trade and climate policy. 

(2) Strengthening international agreements and climate finance support 

• Strengthening of the Paris Agreement: As the COP progresses, the Nationally Determined Contributions (NDCs) within the framework of the Paris Agreement gradually increase, and countries are required to resubmit updated emission reduction targets every five years. Policies around the world will continue to increase their ambitions, especially in the context of achieving net-zero emissions by 2050, which will promote the implementation of more efficient emission reduction technologies and policies. 

• Climate Finance Support for Developing Countries: The Global Climate Policy Framework emphasizes the vulnerability of developing countries in addressing climate change, and through climate finance support, developing countries can obtain technical and financial assistance for energy transition and adaptation measures. These funds mainly come from commitments from governments and the private sector in developed countries and are distributed through mechanisms such as the Green Climate Fund (GCF). 

(3) Technological innovation and market-driven development 

• Renewable energy technologies: With the implementation of carbon taxes and ETS, many companies have begun to invest in clean technologies, especially in fields such as solar, wind, hydrogen, and nuclear energy. These technological advancements not only reduce carbon emissions but also promote the global energy transition and accelerate the replacement of fossil fuels.

•  Carbon capture and storage (CCS) technologies: Many countries are increasing investment in carbon capture and storage technologies, which can effectively reduce greenhouse gas emissions in high-emission industrial and energy sectors and serve as important transition technologies in the long-term transition period. 

• Electric Vehicle Popularization and Transportation Transformation: Countries are actively promoting the popularization of electric vehicles, which is a key measure to reduce emissions in the transportation sector. Major markets such as the European Union, the United States, and China have introduced electric vehicle subsidy policies and set a timetable for banning the sale of fuel vehicles in the future. This will significantly reduce the carbon footprint of the transportation sector and facilitate the construction of charging infrastructure.

 (4) Regional policy synergy and carbon market linkage 

• Regional carbon market synergy: With the development of carbon markets, carbon trading systems between countries and regions have begun to be linked, for example, the European Union and Switzerland have joined their carbon markets. In the future, there may be more cross-regional carbon market linkages, allowing companies to trade carbon emission rights on a larger scale, thereby achieving more efficient global emission reduction plans. 

• Regional Policy Synergy: For example, the California Carbon Market in North America has formed a regional carbon trading market with the Northeastern States Coalition (RGGI), and these policy synergies have promoted the expansion of local climate action in the United States, filling gaps in federal policy. 

3.6.6. Industrial Transformation and Net-Zero Strategies 

(1) Emission Reduction Actions in High-Emission Industries 

• Transformation of the Energy Sector: The global energy sector is at the heart of emission reduction actions. The transformation of the energy sector includes phasing out coal-fired power generation, increasing the proportion of renewable energy generation, and promoting energy efficiency. Major countries such as China, the United States, and the European Union have set coal-fired phase-out schedules and require companies to reduce emissions. 

• High-carbon-intensive industries such as steel and cement: These industries face significant technical challenges and require emission reductions through innovative technologies such as hydrogen metallurgy or carbon capture and storage. Governments have provided subsidies and technical support to these industries to help them accelerate their low-carbon transition. 

(2)  financial and investment institutions: 

• Net-zero transition climate-related financial disclosures (TCFD):Global investors and financial institutions are increasingly concerned about the impact of climate risks on their portfolios. The TCFD framework has become an important standard for corporate climate disclosure globally, pushing financial institutions to reevaluate their investments in high-emitting industries and channel funds into low-carbon and renewable energy projects. 

• Green Investment and Sustainable Finance: Green bonds and sustainable bonds have become mainstream products in financial markets, driving capital flows towards climate-friendly projects. Global financial markets continue to support net-zero emissions and promote more investors to participate in climate action through the formulation of green finance standards 

3.5.7. Future Challenges and Opportunities for Global Net-Zero Policies As climate risks intensify, global net-zero policies will face more challenges and opportunities: 

(1) Challenging 

• Carbon Leakage and Global Equity: Carbon leakage (the shift of high-emitting industries to countries without carbon taxes or ETS) may weaken the effectiveness of carbon pricing mechanisms. There is a need for more consistent carbon pricing policies and further improved carbon border adjustment mechanisms internationally. 

• Adaptation and Transformation in Developing Countries: Despite the higher climate risks faced by developing countries, their emission reduction actions are limited by their economic capabilities. How to balance economic growth and carbon emission reduction will be an important challenge in the future. 

• Speed and Scale of Technological Innovation: Achieving global net-zero goals requires breakthrough technologies, but there are still significant challenges in the development, commercialization, and large-scale application of these technologies, especially in high-emission industries. 

(2) Opportunities 

•  Global Carbon Market Integration and Linkage: As more countries join the carbon market, there may be more regional market linkages in the future, which will further improve market efficiency and promote the improvement of the global carbon trading system. 

• Development of green economy: The promotion of net-zero policies will bring about the growth of green technology and low-carbon industries. Renewable energy, electric vehicles, hydrogen energy, carbon capture and storage will all become important engines of global economic growth in the future. 

• Deepening Global Cooperation: Climate change is a global issue, and countries need to further strengthen cooperation in the response process, including technology sharing, financial support, and policy coordination. International climate finance institutions such as the Green Climate Fund (GCF) and the World Bank will play a more critical role in promoting the development of China's country to combat climate change. This also means that international institutions, including the Green Climate Fund (GCF) and the World Bank, will play a greater role in promoting decarbonization in developing countries. 

3.6.8. Synthesis of specific policies, strategies and programs 

In order to avoid temperature rise exceeding the limit of 1.5°C to 2°C, countries, regions and international organizations around the world have adopted different policies, strategies and solutions. The following are specific examples of comprehensive measures: 

(1) National Policy

•  U.S. climate plan 

• rejoins the Paris Agreement: The U.S. returns to the Paris Agreement, emphasizing global climate cooperation. 

• Inflation Reduction Act: This bill provides significant subsidies and tax incentives for new energy and climate technologies, including the promotion of electric vehicles, wind and solar technologies, and promotes the reduction of carbon emissions in the industrial sector. 

• China's 2060 carbon neutrality target 

• carbon market: China's national carbon emission trading market is one of the largest in the world and is gradually covering more high-emission industries. 

• Clean energy development: China leads the world in solar and wind energy production capacity, and plans to accelerate the promotion of nuclear and hydrogen energy to support the achievement of carbon neutrality goals by 2060.

•  EU "European Green Deal" 

• Carbon Border Adjustment Mechanism (CBAM): The EU's CBAM is an important tool to prevent carbon leakage, imposing carbon taxes on imported products to ensure that the competitiveness of European companies is not compromised by carbon price differences in different regions of the world. 

• ETS Expansion and Reform: The European Union's Emissions Trading System (ETS) is already the most mature carbon market in the world, and it continues to strengthen its coverage of high-emitting industries such as industry and transportation. 

(2) Regional Collaborative Cooperation 

• C40 Cities Climate Leadership Group 

• Urban Emission Reduction Actions: Nearly 100 major cities around the world have committed to achieving carbon neutrality by 2050 and are vigorously promoting the electrification of public transportation, the construction of renewable energy, and the resilience of urban infrastructure. 

• North American Emissions Trading Market 

• California and Northeastern States Coalition (RGGI): These state alliances work together to implement carbon markets across generation, industry, and transportation, driving the expansion of local climate action. 

(3) Net-zero strategies for businesses and industries 

• Science Based on Targets initiative (SBTi) 

• Scientific Alignment Carbon Emission Reduction Targets: The SBTi helps companies set emission reduction plans that align with global climate goals, setting short-term and long-term emission reduction action targets based on scientific data to ensure that their carbon neutrality commitments have substantial results. 

• RE100 and the Renewable Energy Transition to 100% Renewable Energy: 

• The RE100 initiative brings together hundreds of global leaders who have committed to 100% renewable energy in the future and accelerate investment in clean energy technologies. 

(4) Technology and innovation support 

• carbon capture and storage (CCS) technology 

• CCS project promotion: Many high-carbon emitting industries such as steel and cement are investing in carbon capture and storage technology on a large scale to reduce their carbon footprint. Both the European Union and China are accelerating the research and development and application of CCS technology. 

• Electric vehicle promotion and energy transition 

• zero-emission transportation policies: The European Union, the United States, and China have all formulated electric vehicle promotion policies and set a timetable for banning the sale of fuel vehicles in the future. This will significantly reduce carbon emissions in the transportation sector and promote the construction of charging infrastructure. 

• Renewable Energy Expansion: Technologies such as solar, wind, and hydrogen are accelerating their applications globally, becoming important pillars of the low-carbon economy. These technological advancements will play a central role in the global energy transition. 

(5) Financial Institutions' Participation in 

• Climate-related Financial Disclosures (TCFD) 

• Climate Risk Disclosure in Financial Markets: Global investors and financial institutions are increasingly concerned about the impact of climate risks on their portfolios, and the TCFD's framework requires companies to disclose financial risks related to climate change, driving investors to reallocate assets, especially between high-carbon industries and renewable energy sectors. 

• Green Bonds and Sustainable Finance: 

• Green Bond Market Growth: The issuance of green bonds is increasing globally, supporting the development of renewable energy, energy efficiency, low-carbon transportation, and other sectors, driving more capital inflows into climate-friendly projects. 

3.6.9. Global Net-Zero Actions 

As global net-zero actions gradually accelerate, future climate policies and emission reduction strategies will increasingly focus on the following aspects: 

(1) Integration and cooperation in global carbon markets 

• Linkage of international carbon markets: In the future, there may be more international carbon market linkages, such as the joint operation of the EU and Swiss carbon markets. This will promote the efficiency of global carbon trading and further promote the reduction of carbon emissions in various countries. 

(2) Technical and financial support for developing countries to enhance emission reduction and adaptation capabilities :

•  Developing countries face financial and technical constraints in addressing climate change, and international cooperation will further strengthen support for developing countries. International institutions such as the Green Climate Fund (GCF) and the World Bank will provide more resources to help developing countries achieve energy transition and improve climate resilience. 

(3) Technological innovation drives 

• the application of breakthrough technologies: From carbon capture and storage (CCS) to hydrogen energy technology, future technological innovations will determine whether countries can effectively achieve net-zero goals. Investing in these cutting-edge technologies and promoting their commercial applications will be an important driver of global climate action. 

(4) In-depth transformation of industries

•  Accelerated emission reduction of high-carbon industries: The transformation of traditional high-carbon industries such as steel, chemicals, and cement will become the top priority for future emission reduction. Countries will continue to provide financial and policy support to help these industries accelerate the application of low-carbon technologies and achieve cleaner production. 

(5) Public Awareness and Action 

• Global Public Participation: Climate action is not only the responsibility of governments and businesses, but also the participation of the global public. As the risk of climate change intensifies, public support for carbon reduction actions will continue to increase, driving governments and businesses to take more active actions. 

Global low-carbon and net-zero policies are composed of a comprehensive framework of multi-level and multi-international collaboration, covering international agreements, regional policies, carbon pricing mechanisms, technological innovation, and the participation of financial institutions. These strategies bring together various global dimensions, providing a comprehensive path of action to combat climate change and achieve the 2050 net-zero goal. 

3.7 Global climate policy and corporate risk (see Figure 3.7.1 Climate risk economy example)

 Climate risk has become a challenge that global companies cannot ignore, especially after governments have introduced stricter climate policies. Companies not only face physical risks during their operations but also need to deal with transition risks brought about by carbon taxes, carbon budget regulation, and mandatory emissions trading systems (ETS). These policies not only change the cost structure of companies but also affect their global competitiveness. 

• Implementation of Carbon Tax and Impact on Business Operations: A carbon tax is a tax levied on corporate carbon emissions, aiming to encourage companies to reduce carbon emissions. For high-carbon emitting industries, the implementation of carbon taxes has significantly increased operational costs. Companies need to take these additional costs into account and adjust their production plans and long-term development strategies based on changes in tax rates. 

• Restrictions on corporate capital allocation and operational decisions by carbon budget control: The global carbon budget refers to the maximum carbon emissions that can be released globally to achieve the 1.5°C warming control target. For businesses, this means that their carbon emissions will be severely capped and will need to be incorporated into capital allocation decisions. For example, companies may have to postpone capital expenditures on certain high-carbon emission projects and instead invest resources in green technologies and low-carbon transitions. 

• Risks and Opportunities of Mandatory Emissions Trading System (ETS) for High-Carbon Emission Industries: ETS is a key tool for global climate change, achieving the goal of controlling total carbon emissions by setting carbon emission quotas and allowing carbon emission trading between companies. For high-carbon emitting industries, ETS is both a challenge and an opportunity. Companies can maintain production by purchasing additional carbon emission allowances, but at the same time, they can also sell excess carbon allowances through technological upgrades and carbon reduction projects to achieve profitability. 

• The impact of carbon policies on corporate competitiveness: Different countries have different policies on carbon emissions, which exposes multinational companies to different costs and risks in different markets. Stricter carbon policies may cause companies to lose competitiveness in countries with high carbon emissions and make it more difficult for them to operate in the global market. Therefore, companies need to flexibly adjust their strategies to adapt to the policy environment of each region. 

3.7.1 Corporate Opportunities in Climate Risk (Refer to Figure 3.7.1 Climate Risk Economy Examples) 

This chart showcases the economic opportunities of companies in climate risks, contrasting risks and opportunities, and highlighting different strategic options in the transition to a low-carbon economy. 

Key Points: 

• Climate Risks: When companies face climate change risks, they include not only physical risks (such as extreme weather and resource scarcity) but also transitional risks (such as carbon policies, legal risks, etc.). These risks directly impact the company's capital allocation and long-term development.

•  Economic Opportunities: As the global market transitions to a low-carbon economy, companies can create economic opportunities through technological innovation, green product development, and participation in carbon markets. These strategies not only help reduce climate risks but also promote long-term growth. This chart is suitable for highlighting how companies seek development opportunities amidst climate risks. 

Specifically, companies can achieve profitability through technological innovation and green financial tools (such as green bonds and carbon trading) while reducing risks posed by climate change. While climate risks pose significant challenges to businesses, they also create new market opportunities for forward-thinking companies. As the transition to a low-carbon economy accelerates, companies can seize opportunities in climate risks by: 

• Emerging Market Opportunities: Demand for low-carbon products and services: As the global demand for eco-friendly products and sustainable technologies increases, companies can seize market opportunities by developing low-carbon products and services. For example, electric vehicles in the automotive industry, renewable energy technologies in the energy industry, and energy-saving materials in the construction industry are all growth points for future markets. 

• Green Finance and Investment Opportunities: Green bonds and sustainable investment funds: Companies can obtain financial support to promote their low-carbon transformation by issuing green bonds or participating in sustainable investment funds. This not only helps companies achieve emission reduction goals but also attracts more investors who value ESG performance. 

• Profit Potential of Carbon Trading Markets: Carbon Trading and Carbon Credits: As global carbon markets expand, companies can earn profits by participating in carbon trading markets. Companies can achieve economic benefits by purchasing or selling carbon credits, while also contributing to the achievement of global carbon emission reduction goals 

3.8 Carbon Market and Corporate Competitiveness 

The carbon market plays an important role in improving corporate competitiveness, especially for high-carbon emission industries, providing a flexible risk response strategy. Companies need to enhance their competitiveness by rationally utilizing internal carbon pricing and participating in carbon trading. 

• Carbon Market Pressures on High-Carbon Emission Companies and Strategies to Respond: High-carbon emitting companies need to deal with increasing carbon market pressures, including fluctuations in carbon prices, restrictions on carbon allowances, and increased emission reduction targets. Businesses can address these pressures by enhancing energy efficiency, technological innovation, and internal carbon pricing. 

• ETS and Internal Pricing Strategies for Corporate Carbon Management: Companies can use internal carbon pricing as a tool to measure investment decisions, factoring carbon costs into their financial considerations, thereby ensuring long-term compliance with carbon reduction policies. This not only helps companies reduce carbon emissions but also enhances competitiveness by reducing carbon costs.

•  Participation in the carbon market enhances the long-term competitiveness of enterprises: By participating in the carbon market, companies can achieve financial growth through carbon credit trading while achieving emission reduction goals, which can significantly enhance long-term competitiveness in the future. 

3.8.1. Corporate Response Strategies: From Emission Reduction to Risk Management

 In the face of increasingly stringent climate policies and market pressures, companies need to develop comprehensive response strategies, from emission reduction target setting to risk management. 

• Set Science-Based Targets (SBTi) and Disclose Progress: Companies should set their emission reduction targets with reference to the Science-Based Targets Initiative (SBTi) and regularly disclose their progress. This not only strengthens the company's reputation in the market but also contributes to achieving global carbon neutrality goals.

•  Climate Scenario Analysis and Enterprise Risk Response Measures: Companies need to conduct climate scenario analysis to assess risks by simulating different climate change scenarios, and formulate specific response strategies based on the analysis results, such as adjusting the supply of raw materials with high carbon emissions, redesigning projects with cleaner production through procurement management systems, and R&D departments. Companies need to use climate scenario analysis to simulate future climate change scenarios, such as the potential risks posed by a global temperature increase of 1.5°C or 2°C. Such scenario analysis can help companies better understand future challenges and adjust supply chains, capital allocation, and production strategies based on the analysis results, thereby reducing the risk of potential future business disruptions. 

• Integration of ESG Risks with Corporate Core Business: To effectively address climate risks, companies need to integrate ESG (Environmental, Social, and Governance) risk management into their core business strategies. This includes not only emission reduction measures but also areas such as supply chain management, product research and development, and market expansion. By integrating ESG into decision-making processes, businesses can better manage climate risks and enhance their long-term sustainability capabilities. 

3.8.2. Capital Allocation and Climate Risk Management 

Capital allocation is at the core of risk management and long-term development of enterprises in the face of climate change challenges. How to balance capital returns and sustainable investment has become a key issue in corporate capital allocation. 

• How climate change affects corporate capital allocation decisions: As global policies impose stricter restrictions on carbon emissions, companies must adjust their capital allocation and invest more capital in low-carbon technologies and sustainable development projects. For example, companies need to consider investing in renewable energy, carbon capture technology (CCS), or other innovative technologies to achieve their long-term emission reduction goals. 

• Balance between sustainable investing and return on capital: Sustainable investing not only involves environmental responsibility but can also put pressure on a company's return on capital in the short term. Companies need to find a balance to ensure they maintain a stable return on capital while achieving their emission reduction goals. This can be achieved through a gradual increase in green investments and the use of carbon markets for profit. 

• How to Use Internal Carbon Pricing to Promote Investment Decisions: As a key tool for businesses, internal carbon pricing can help companies consider future carbon costs when making capital allocation decisions. This not only helps companies achieve their long-term emission reduction goals but also promotes investment shifts towards more sustainable projects.

 3.8.3. Challenges and Preparations 

As global climate change risks continue to intensify, companies will face increasing policy pressures and market challenges in the future. However, it also creates new development opportunities for enterprises, especially in the context of the growing demand for low-carbon products and services, the expansion of green financial markets, and the gradual maturity of carbon markets. Only by actively addressing climate risks, setting scientific emission reduction targets, and effectively using carbon market tools can companies gain a competitive advantage in the global low-carbon economic transition. 

• Long-term risks and opportunities for companies driven by climate policies: Global policies such as carbon taxes, carbon budgets, and ETS will be important drivers for corporate development in the future. By flexibly responding to these policies, companies can seize opportunities in the market while reducing risks. 

• The impact of carbon markets and climate risk management on the future competitiveness of enterprises: The maturity of carbon markets will further promote corporate participation in global emission reduction actions and promote technological innovation. By leveraging carbon markets and effectively managing climate risks, companies will be able to enhance their global competitiveness and ensure their long-term sustainable development. 

Companies that do not face up to net-zero issues will face elimination and operational risks 

Companies do not face up to net-zero issues and will face operational risks 

As global actions to combat climate change accelerate, net-zero emissions are no longer just an initiative of environmental organizations and scientists, but have become the core requirements of governments, international organizations, investment institutions, and consumers for businesses. If companies ignore net-zero issues, they will not only face increasing operating pressure, but may even risk being eliminated by the market. This article will explore in detail the sources of these risks and their profound impact on businesses, and propose specific countermeasures. 

I. Global Sources of Stress and Business Risks 

The global scientific community unanimously emphasizes that climate change has become one of the biggest threats affecting the future survival of all mankind and global economic stability. The United Nations' Intergovernmental Panel on Climate Change (IPCC) pointed out that to limit global warming to 1.5°C, the world must achieve net-zero emissions by 2050. However, at this stage, global carbon dioxide emissions still exceed human and natural removals, resulting in an increase in atmospheric carbon dioxide concentrations year by year. Experts warn that if cumulative carbon dioxide emissions exceed the limit of 450 gigatonnes (GT), global warming will be difficult to control within 1.5°C. This shows that time is extremely urgent, and companies must act quickly to reduce future business risks. 

II. Specific Policies and Economic Measures 

1. Carbon Tax and Carbon Fee Pressure

 Carbon tax and carbon fee are important economic tools for governments to promote carbon reduction actions, increasing the operating costs of high-carbon emitting industries by taxing carbon emissions. This tax burden will incentivize companies to lower their carbon emissions, switch to renewable energy sources or improve production technologies. However, for high-carbon emitting companies such as steel, petrochemicals, and cement, such measures will bring significant financial pressure. 

Taiwan officially implemented a carbon fee system in 2023, imposing carbon fees on companies whose annual emissions meet certain standards, and plans to increase the rate year by year to gradually meet international standards. This strategy aims to force companies to accelerate the pace of carbon reduction transformation, otherwise they will face the risk of a sharp rise in costs. Future carbon fees may cover more industries and emission sources, further increasing the financial risk of enterprises. Additionally, the European Union has implemented the Carbon Border Adjustment Mechanism (CBAM) to impose carbon taxes on imported carbon-intensive products to prevent carbon leakage, which will directly impact the market competitiveness of export-oriented companies. Sweden and Canada have also implemented high carbon tax measures, such as Sweden's carbon tax of up to 120 euros per ton, which has greatly promoted the carbon reduction actions of local companies. 

2. Cap-and-trade

 Cap-and-trade is a market-based carbon reduction mechanism that sets a cap on total carbon emissions and allows companies to trade carbon emission rights. The government sets a total emission cap (Cap) and allocates or auctions this cap to companies. If a company can reduce its emissions and fall below its quota, it can sell the remaining carbon emission rights to other companies that require more quotas, forming a trade. This system encourages companies to take lower-cost emission reduction actions and allows market mechanisms to work. The European Union Emissions Trading System (EU ETS) is the world's largest cap-and-trade system, covering more than 11,000 power plants and industrial facilities. If companies fail to effectively reduce emissions, they will need to purchase carbon allowances, which increases their operating costs. Additionally, California in the United States and regional carbon markets in the Northeast, such as RGGI, are also using this mechanism to encourage companies to take proactive carbon reduction measures. In the future, this system may expand its scope of influence and further strengthen compliance requirements for enterprises. 

III. Specific operational risks of ignoring net-zero issues

 1. Financial risks

 Companies that ignore net-zero issues will face a series of financial risks. First of all, as carbon taxes and fees increase year by year, the operating costs of high-carbon industries will continue to increase, further eroding profit margins. This will directly affect the financial performance of the company, especially on the balance sheet, and the company may need to increase the debt provision or liability recognition account related to carbon emissions, which will further affect the net interest rate and return on capital. In addition, financial institutions' support for high-carbon industries is gradually decreasing, and banks may reduce their credit lines for high-carbon enterprises in the future, or even refuse to provide financial services altogether, a phenomenon known as the "crowding out effect" of the financial system. In terms of capital markets, as investors increasingly focus on ESG (environmental, social, and governance) performance, companies with low ESG ratings will find it difficult to attract investment and may face the risk of a large sell-off in their stocks. 

2. Market competition risk

 The market has increasingly stringent requirements for corporate carbon emissions, and companies in the supply chain pay special attention to the carbon emission data of their partners. As carbon data transparency becomes a barrier to market access, companies that fail to effectively manage their carbon emissions may be rejected by customers in the supply chain, losing important business partners and market share. In addition, consumer demand for low-carbon and environmentally friendly products is also increasing, and companies that fail to adapt to this trend will struggle to attract young consumers and environmentally conscious customer bases. These changes will significantly reduce the competitiveness of companies with high carbon emissions.

3. Policy risks: 

Policy-level risks come from increasingly stringent carbon emission regulations in various countries. The introduction of the Carbon Border Tax (CBAM) by the European Union has already had a substantial impact on imported products, especially for exporters in high-carbon industries, which will significantly increase import costs for importers, thereby reducing the demand for high-carbon products. Additionally, future carbon policies may further restrict market access for high-carbon companies, increasing compliance costs and operational risks for companies. For example, in California's California Global Warming Solutions Act (AB 32), companies are required to reduce greenhouse gas emissions or face significant fines. 

IV.Coping Strategies: Avoiding Market Elimination 

To effectively address these risks, companies must develop and implement comprehensive net-zero transformation strategies. 

1. Establish an internal carbon pricing mechanism 

Companies can simulate the impact of future carbon costs by setting internal carbon prices, incorporating carbon emission costs into the decision-making process. This approach not only helps measure the impact of carbon emissions on corporate finances but also promotes more effective resource allocation. According to the recommendations of the World Bank's Carbon Pricing Leadership Coalition (CPLC), companies can use internal carbon prices as a risk management tool to enhance flexibility in climate policies. This mechanism can help companies prepare for future policy changes in advance and reduce financial impacts. 

2. Supply Chain Carbon Management 

Businesses must implement data-driven supply chain carbon management systems to track and reduce carbon emissions. The Taiwanese government's supply chain carbon disclosure bill requires some companies to disclose their supply chain carbon data, forcing companies to collaborate with suppliers to jointly promote carbon emission reduction actions. Data transparency and emission reduction targets will become the core competitiveness in future supply chain management, and companies need to integrate carbon management into their supply chain strategies to maintain an advantage in the competition. 

3. Invest in green technology and finance : 

Investing in green technology and renewable energy projects can reduce a company's carbon footprint and enhance its ESG rating. Green financial instruments, such as green bonds, are an effective way to raise funds to support decarbonization projects. According to the International Capital Market Association's (ICMA) Green Bond Principles, companies need to prove that the funds are used for environmental protection and carbon reduction projects, which can help attract sustainable investors and strengthen the company's market position. In addition, companies can actively participate in government-supported renewable energy projects and obtain corresponding policy subsidies and market opportunities, which will help reduce operating costs and enhance market competitiveness. 

V. If we do not pay attention to the imminent impact and the opportunity to transition to competitiveness 

the pressure on global net-zero emissions is rapidly increasing, and if companies do not actively respond, they will not only face significant financial, policy and market risks, but may also be replaced by more resilient competitors. Firstly, with the gradual implementation of carbon taxes and fee policies, high-carbon emitting companies will bear increasingly heavy operational burdens, further affecting capital returns and overall financial stability. At the same time, companies that fail to comply with the tightening environmental regulations in various countries may lose market access and even face high fines and a sharp increase in compliance costs. However, these challenges also provide unprecedented opportunities for innovation and growth for businesses. As the world transitions to a low-carbon economy, if companies can act in advance, they can not only mitigate future financial risks but also seize opportunities in market changes. By establishing internal carbon pricing mechanisms, companies can more accurately assess carbon costs and integrate them into operational decisions, which helps improve resource allocation efficiency and incentivizes carbon reduction innovation. Additionally, implementing data-driven supply chain carbon management will help enhance transparency, allowing businesses to align with environmentally conscious business partners and consumers, enhancing brand image and customer trust. Investing in green technology is the key to enhancing competitiveness. Whether it's developing low-carbon products, improving production processes, or switching to renewable energy, these investments will enhance the long-term sustainability of businesses and open up new business opportunities. For example, as the green financial market continues to expand, companies can raise funds by issuing green bonds, support low-carbon transition projects, and attract environmental, social, and governance (ESG) oriented investors, thereby enhancing financial resilience. In conclusion, businesses should recognize that the challenges and opportunities of climate change coexist. If they can quickly adapt and actively deploy carbon reduction strategies, they can not only maintain competitiveness in the harsh market environment but also seize new business opportunities in the global wave of low-carbon economic transformation, become leaders in the future market, and shape long-term sustainable development advantages.