Editor’s Note : This is the first of the three part series on Net-Zero and includes What is Net Zero and what are the means to achieve Net Zero(Part 1), How to set Science Based Net Zero targets(Part 2) and How to finance Net Zero targets using specific debt instruments(Part 3).
Terms like “Net Zero”, “carbon neutral”, and “climate positive” are now part of the mainstream discourse on climate change. NZ is now perhaps used more as an abbreviation of Net Zero than of New Zealand, and terms using NZ are gaining prominence(like NZAOA – Net-Zero Asset Owner Alliance, NZAM – Net Zero Asset Managers Initiative, NZBA -Net Zero Banking Alliance and GFANZ – Glasgow Financial Alliance for Net Zero).
As practitioners, we sometimes get disoriented by these similar but different terminologies. In this article, we first collate and describe some of these terminologies on emission reductions, and subsequently list some of the means to achieve the emission reduction goals.
- ” Positive – Zero/Neutral – Negative” Spectrum
Positive is what all of us like, but in the case of climate change, or the specific context of emissions, “positive” is not positive but a problem the world is trying to address. The excellent solution to “Positive” is “Zero”, and the better solution is “Negative”. Let us look at what it means.
- Net Positive Emissions – The literal meaning of Net Positive emissions should be the current default state: we are emitting more Green House Gases (GHG) than the Earth’s natural mechanisms can absorb or remove. However, several practitioners somehow use the term to indicate the opposite because we are all tuned to think that any expression that has the word “positive” is, well, positive and contributes to progress in tackling climate change. Nonetheless, this term can be confusing and, thankfully, not used a lot in the discussions on decarbonisation and emission reductions.
- Net Zero or “Climate Neutral” – This is perhaps the most used expression related to climate change, be it governments, corporates or investors. As the word suggests, Net Zero is achieved when the exact amount of GHG emitted into the atmosphere is removed from the atmosphere.
- Net Zero Carbon Emissions or “Carbon Neutral” – This is a state where all the carbon emitted into the atmosphere is also removed. “Net Zero Carbon Emissions” is a subset of “Net Zero Emissions”, which includes all GHG. Corporates that have made “Carbon Neutral” commitments include Apple, which targets to become “carbon neutral” for its supply chain and products by 2030(read here).
- Net Negative emissions– This refers to when more GHG emissions are removed from the atmosphere than are emitted.
- Net “Carbon Negative” – The term is similar to Net Negative emissions but only includes carbon – removing more carbon from the atmosphere than is emitted. An excellent example of this idea is Microsoft, which has set a “Carbon Negative by 2030” target (read more here).
- Climate Positive – This term is sometimes used interchangeably with “Net Negative emissions” or “Carbon Negative” and has similar connotations.
These terms are made actionable by a firm by first calculating baseline emissions, setting reduction targets, investing in decarbonisation initiatives in line with reduction targets, monitoring emissions trajectories and reporting the progress. Baseline emissions estimation and progress monitoring is done using the Scope 1, 2 and 3 emissions accounting guidelines provided by the Green House Protocol(read more about it here).
- Moving to “Zero” and to “Negative” – Mechanisms
There are several terms related to the means to achieve the “Net Zero” or “Carbon Negative” goals. A non-exhaustive list is given below.
- Reduction – Achieved either by switching to low carbon emission sources like renewable energy or through process improvements and energy efficiency measures.
- Avoidance – Reducing deforestation and switching from physical to online meetings are examples of avoiding emissions.
- Removal– Reducing emissions can be done by natural means like planting trees(afforestation) or artificial means like Carbon Capture and Storage (CCS).
- Offsetting – Paying others not to emit carbon and other GHG using formal market mechanisms like carbon credits or similar exchange mechanisms. (Doing less harmful)
- Insetting – Paying others to remove carbon through initiatives like reforestation and setting up renewable energy projects. A good explainer of Offsetting vs Insetting can be accessed here.
- Elimination and Neutralisation – These are complementary actions. While “carbon elimination” means a reduction of carbon within a firm’s value chain, “Neutralisation” implies a reduction of carbon outside a firm’s value chain, either through nature-based solutions like reforestation or through technological solutions like Carbon Capture and Storage (CCS). This could include offsetting and insetting.
Terms like “Compensation” and “Like for Like” are similar to “offset” with some minor nuances.
While a dizzying array of terminologies is used in addressing change, the goal is relatively straightforward – stabilize the current net emissions to zero in the short term, and start eliminating accumulated emissions in the long term. Once there is a clear understanding of “Net Zero”, the next steps would be decide on how to set Science based “Net Zero” or emission reduction targets, and to pursue the means to finance the emission reduction initiatives. These are covered in the next two parts of this series and you can read the Part 2 here and Part 3 here.
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