Transformation Risk Scenario Analysis
According to the scenario analysis results from The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), if the current situation continues, the global temperature will rise by 1.5℃ in 2030, 2℃in 2050 and 3℃ in 2090.
In the case of global temperature rise of 3℃, about 10% of the labor force will be lost due to high temperature. River flooding doubles in China and triples in India. Typhoons and cyclones increased by 16% in Japan, 12% in the Philippines, and 47% in the United States. On the economic side, due to the impact of natural disasters, the world will lose 2% of GDP in 2040, and the economic development of many countries has stagnated since then. And if the goal of net zero by 2050 can be achieved, although the temperature will still rise by 1.4℃ by 2050, the next generation of human beings will have the opportunity to change. The greatest transition risk is our mismanagement of emission reduction pathway and miss last chance to prevent the critical point.
Scenario |
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TECO’s Action |
NET ZERO 2050
global temperature rise 1.4℃ |
Five-fold increase in renewable energy, 50% electrification of residential and commercial buildings (including the production of building materials), Use 40% carbon-neutral fuel (including hydrogen energy, bio diesel, etc.), sequester 5 Gt of carbon per year, improve energy efficiency, reduce energy consumption intensity by 60%, and decarbonize the use of agriculture, forestry and land resources. |
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IEA 2DS EU carbon price rises above 100 euros per ton |
The EU carbon price has exceed 100 euros (about 107 US dollars) per ton in early 2023, which is the highest price since the EU launched the carbon emissions trading system (ETS) in 2005. |
If TECO does not deploy ahead of schedule, it will lose the competitiveness of international trade due to carbon tax. Taking a 150HP motor as an example, the carbon emission in the manufacturing stage is 375 kgCO2e and it will be charged during export tradings. When the carbon price reaches 100 euros per metric ton, the potential carbon cost is 40 U.S. dollars for every motor to export. In 2022, the number of motors shipped from TECO's Asian plant to Motovario, Italy is 5,469 units, and Westinghouse, USA is 143,183 units. The total cost impact is NTD 178,382,400. TECO implements the "internal carbon price system" to reduce the carbon footprint of products in materials and manufacturing stages. |
NDC Power shortage and rising electricity fee in the countries where TECO belong |
Italy’s electricity price has quadrupled since the start of the Ukrainian-Russian war, China requires production to be shift from daytime to night, and Taiwan’s average electricity price in 2023 has risen by 11%. Electricity demand has increased but electricity costs have continued to rise. Enterprises must have their own electricity generation capability to face future challenges. |
In 2022, TECO started to build solar power generation facilities in factory sites, including factories in Wuxi Jiangsu, Qingdao Shandong, Vietnam, and Malaysia, with a total capacity of 5MW. Together with the original power generation capacity, the total power generation in 2022 is 9.6 million kWh has accounted for 10% of the total electricity consumption of the group (global base). In 2023, power generation facilities will be expanded in Italy, Texas, and Australia. The target annual power generation will increase by about 4.8 million kWh, which can reach 15% of the total power consumption. |
Physical Risk Scenario Analysis
RCP Scenario: Representative Concentration Pathways (RCPs) which utilize the change in radiative forcing from 1750 to 2100 as the main indicator are employed for future temperature and precipitation change analysis. RCP2.6 (increase in radiative forcing by 2.6W/m2) is the scenario of mitigated global warming, while RCP4.5-RCP6.0 and RCP8.5 (and above) are scenarios characterized by limited mitigation or no mitigation, respectively. According to the scenario simulations of Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) and Network for Greening the Financial System (NGFS), RCP results in vastly different outcomes for global TECO manufacture sites:
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RCP 2.6 CO2 level 421 ppm |
RCP 6.0 CO2 level 670 ppm |
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Temperature |
Productivity |
Temperature |
Productivity |
|
rise by 2.3℃ |
drop by 2.3 (pp) |
rise by 2℃ |
drop by 2.8 (pp) |
|
rise by 1.3℃ |
drop by 2.5 (pp) |
rise by 1.5℃ |
drop by 3.1 (pp) |
|
rise by 1.4℃ |
drop by 4.0 (pp) |
rise by 1.6℃ |
drop by 4.9 (pp) |
|
rise by1.3℃ |
drop by 1.0 (pp) |
rise by 1.6℃ |
drop by 1.2 (pp) |
|
rise by 1.0℃ |
drop by 5.6 (pp) |
rise by 1.2℃ |
drop by 6.4 (pp) |
|
rise by 1.0℃ |
drop by 5.8 (pp) |
rise by 1.1℃ |
drop by 6.7 (pp) |
|
rise by 1.0℃ |
drop by 1.9 (pp) |
rise by 1.4℃ |
drop by 2.3 (pp) |
|
rise by 1.1℃ |
drop by 6.1 (pp) |
rise by 1.2℃ |
drop by 7.1 (pp) |
Financial impact:
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RCP 2.6 CO2 421 ppm |
RCP 6.0 CO2 670 ppm |
2050 weather phenomenon |
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Impacts |
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Losses |
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Data source for Taiwan is from Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) and is compared to current weather data.
Water Sensitivity Analysis
TECO Motor's flagship Chongli factory is located in Taoyuan. Based on the statistical data of the annual hydrological report released by Taiwan as a reference for drought-prone areas, the water sensitivity analysis of weather phenomena and corresponding measures under RCP2.6 and 6.0 scenarios in 2021 is as follows:
Scenario |
Corresponding actions |
RCP 2.6 CO2 level 421 ppm
What If it floods for more than 10 cm high? |
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RCP 6.0 CO2 level 670 ppm
What If water supply stops for 1 week? |
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Contact window: ESG Office/ Jay LC Huang, csr@teco.com.tw