Carbon Ratings

What is net zero?

by
Polly Thompson
May 31, 2022
What is net zero and how does it differ from other climate claims
What is net zero and how does it differ from other climate claims

What does net zero mean?

Net zero means causing no overall increase in greenhouse gases (GHGs) in the atmosphere; therefore not contributing to climate change. Net zero can apply to a range of entities, such as a company, country, product, city or individual family, within a given period (usually a calendar year).

What exactly does this look like? To make things clearer, let’s break down the term.

Net means on balance, overall, or, in this context, considering the balance between GHGs fluxes into and out of the atmosphere.

Zero here simply means zero emissions of GHGs.

So net zero, at a global scale, means ensuring there is no overall increase in GHGs in the atmosphere. This can be achieved by minimizing emissions and balancing any residual emissions with removals. According to the world’s leading climate scientists, the IPCC, we need to reach global net zero by 2050 to maximize our chances of limiting warming to 1.5°C.

Where does the private sector fit in?

Let’s take the example of a company that wants to contribute to global net zero. Is it as simple as making sure that every ton of CO2 emitted is compensated for by removing a ton of CO2 from the atmosphere? No.

We explore the issue of avoidance vs. removals in depth in this blog, but the key issue is that we can’t remove carbon at the scale needed to compensate for the level of emissions today. Reaching global net zero by 2050 will therefore involve both scaling removals, and even more importantly, dramatically reducing emissions on a global scale.

To legitimately claim to be on a net zero trajectory, companies need to align with this pathway. For these reasons, net zero commitments – such as the Science Based Targets Initiative (SBTi) – usually require an organization to pledge to reduce its emissions in line with global climate targets, as well as, pay to remove any residual emissions. Another example is the UN’s Race to Zero campaign, which defines an organization as having reached net zero when it has: “reduced its emissions following science-based pathways, with any remaining GHG emissions attributable to that actor being fully neutralized by like-for-like removals”.

Who can help set a net zero target?

The SBTi is leading the way in defining and validating targets aligned with the Paris Agreement and limiting warming to 1.5°C. They have useful resources and further information to explore the topic, and lots of sector-specific guidance and tools.

The UN Race to Zero Campaign is another coalition of leading net zero initiatives for many types of organizations, with strong requirements around integrity and transparency. This site is useful for finding out about the many sector- and industry-specific alliances that make up the Race to Zero coalition and that are supporting organizations to get to net zero. These include the NZAM (Net Zero Asset Managers initiative), NZBA (Net Zero Banking Alliance), and the Net Zero Carbon Building Commitment.

Setting a target

Net zero targets, according to the SBTi and Race to Zero frameworks, require 3 main actions:

Step 1 - measuring annual emissions

An essential first step to net zero commitments is to measure GHG emissions in the base year, in order to benchmark future reductions against. It is critical that an organization considers all emissions in its “value chain'', meaning those related to all its activities, goods, services and investments. To aid in understanding this, emissions are usually categorized into three groups:

  • Scope 1 emissions: direct emissions from sources owned and controlled by the organization; for example, company cars.
  • Scope 2 emissions: indirect emissions from the purchase of energy; for example, fossil fuel generated electricity used in the company office.
  • Scope 3 emissions: all other indirect emissions related to the organization's activities, both upstream and downstream. This ranges from the emissions in the supply chain of a purchased good or service, to the emissions generated by a bank’s investments. For many organizations, scope 3 accounts for a vast majority of their emissions.

Step 2 - reducing emissions

To stay on a 1.5°C-aligned pathway, we need to reach global zero emissions by 2050, and halve emissions by 2030. The leading net zero commitments, therefore, require emissions reductions aligned with this pathway for scope 1 and 2 emissions. Scope 3 emissions are harder to reduce as they are generally farther from an organization's direct control. However, the organization is still expected to set ambitious, measurable targets and actively influence the reduction in its scope 3 emissions.

Step 3 - neutralizing residual emissions

It is not yet technologically or economically feasible to avoid 100% of emissions globally. For example, we do not yet have a widely scalable technology to allow zero-emission air travel. Once every possible action has been taken to reduce emissions, any unavoidable emissions – also called residual emissions – must be neutralized. This means removing an equivalent amount of GHGs from the atmosphere each year. This is usually done by buying and retiring carbon removals credits.

What about offsetting?

Under the leading net zero frameworks, an organization can only claim to be net zero once it has achieved its science-based emission reduction targets (usually a reduction of 90% or more) and neutralized the residual emissions. While it is transitioning to this stage, an organization should offset its emissions using high quality carbon credits (avoidance credits can be used here). This is also referred to as “beyond value chain mitigation” (BVCM) by the SBTi. The details of this are not yet totally clear, and there has been considerable confusion about the concept of BVCM to date, but what is certain is that offsetting alone will not be enough to qualify an organization as net zero.

This isn’t to say that avoidance credits aren’t useful. Carbon markets are the best mechanism we have for incentivizing a wide range of emissions reductions activities, which are essential to reach net zero at a global scale. It doesn’t need to be an “either/or” argument—we need all the tools we have to combat climate change. 

Now is the time to set a net zero target

We are relying on the world transitioning to net zero very soon. Everyone has a role to play in this, and setting a net zero target is an essential step. There is also an important role for companies to pay for emissions reductions outside of their value chains, such as by purchasing and retiring high quality carbon credits.

There is increasing focus on this area, with public pressure mounting and regulations around climate impacts likely to become more stringent and tightly enforced. There has never been a better time to set a net zero target.

Which carbon credits are high quality? Sylvera’s carbon credits ratings can help you select high integrity credits for your net zero strategies. Find out more here 

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