Carbon neutral vs net zero: What's the difference?

In previous blogs we've explored the definition of carbon neutral and net zero.

At first glance, they appear to mean similar things. So, here we dig into the difference between these terms—and other ones you might come across—for organizations making climate commitments.

It's important to note that, at the moment, there are no universally agreed upon definitions for these terms. Currently, climate commitments are totally voluntary and there is no standardized, legally binding regulatory framework. (Though, there are voluntary initiatives that monitor these things.)

We've used definitions that reflect common usage. But not everyone will use these terms in exactly the same way. As long as that's clear, let's dive in!

What is carbon neutral?

Carbon neutral organizations compensate for, or offset, their greenhouse gas emissions (like carbon dioxide and methane) every year by purchasing and then retiring carbon credits

There are varied interpretations of this. Organizations with net zero emissions commitments will accurately measure emissions —not just from their own activities (scope 1 and 2,) but also from their wider value chain (scope 3). Then they'll purchase high quality carbon offsets. The goal? To help avoid fines, satisfy customers, and limit global warming.

At the other end of the spectrum, organizations only measure and offset a small portion of their emissions, and do not conduct appropriate due diligence on their carbon credit purchases. These companies don't prioritize the elimination of global greenhouse gas emissions or climate change.

What is net zero?

For organizations, setting a net zero target means committing to reduce GHG emissions as much as possible (usually by at least 90%) by a target date (generally no later than 2050) to align with global climate goals; then “neutralizing” remaining emissions with removals credits.

Only at this point can the organization be considered net zero. Until this point is reached, organizations can choose to compensate for, or offset, their emissions using carbon credits. This is the approach set out by the leading industry target-setting body, the Science-Based Targets Initiative (SBTi). 

GHG emissions reduction requirements reflect technological and economical feasibility for the organization's sector. These activities might include improving energy efficiency, switching to renewable energy sources, and using more sustainable supply chains. 

What's the difference between carbon neutral and net zero?

There are three key differences between carbon neutral and net zero claims:

1. Net zero requires GHG emissions to be significantly reduced. Carbon neutral does not.
2. Because of this requirement, net zero is usually a target set for the future, as emissions reductions take time. Organizations with a net zero target should be actively reducing their emissions. But the obligation to neutralize residual emissions only applies once they reach their emissions reduction target. Carbon neutrality can be achieved very quickly, and so organizations claiming to be carbon neutral should be currently offsetting all their emissions. 
3. Net zero carbon emissions requires removal credits to be used to neutralize residual GHG emissions, whereas carbon neutral allows for both GHG removals and emissions avoidance credits.

Eventually, we hope all companies reach net zero and global emissions cease. But carbon neutral goals, like investing in renewable energy to cut back on fossil fuels, are a great start.

Other definitions to know

It's not just carbon neutral vs net zero you need to understand. Organizations make climate claims using a wide range of terms. For example, Google wants to become carbon free next decade. But what do all these terms mean?

• Carbon negative is a higher ambition option than carbon neutral. Beyond compensating for one's own emissions with offsetting, additional GHGs must also be removed from the atmosphere. This would cause a net reduction in GHGs in our environment, hence negative.
• The terms climate positive and carbon positive are often used interchangeably with carbon negative. In some cases the term “positive” has the definition of “being greater than zero”- referring to not just having zero impact on the atmosphere but actually net reducing GHGs. In other cases the term “positive” has the definition of “having a good effect” and is used to refer to the co-benefits that net negative emissions can have, like benefiting biodiversity and food security.
• Carbon-free is a very high-ambition target. A carbon-free product, service, or organization is one that doesn't generate any carbon emissions across its entire value chain or supply chain, from manufacturing to operations. There are no known carbon-free products yet due to this high level of ambition.

In general, these claims are made on the basis of emissions within a calendar year. But in some cases these claims refer to all of a company's historical emissions, such as when Google announced in 2020 that it had compensated for all of its global GHG emissions since the company was founded.

Clarity is key to achieve net zero emissions

The range of terms used, along with the lack of universal definitions, make this topic confusing. It's, therefore, key that organizations clarify their carbon neutral or net zero commitments.

Specifically, organizations should disclose what they are doing now, what they are aiming for, and when they hope to achieve their carbon neutrality or net zero carbon targets. Then they should publicly report their progress towards these goals so they're held accountable to reducing emissions accordingly.

In the future, governments will likely require companies to set science based targets initiatives; then regulate these commitments to help reach global climate goals. Now is a great time to get ahead of the curve and implement high quality carbon capture and avoidance protocols.

How can you incorporate carbon credits into your climate strategy? Sylvera's carbon credits ratings can help you select high quality credits. Request a demo to find out more.