Net-Zero: What is it and how do we get there?

Blog Post Mission Investing
Published March 26, 2021

Shilpa Patel

Senior Advisor

We’ve just wrapped up the Confluence Climate Solutions Summit. The day was heavily devoted to “net-zero” – a much bandied term that seems to pop up everywhere these days, from country commitments to corporate targets to industry campaigns. Our break-out session tried to make sense of what this means for the impact investment community and philanthropy more broadly.

What exactly is net-zero?

In a sentence: Net-zero is a balancing of produced emissions with negative emissions. To be consistent with a 1.5⁰C warming scenario, we need to reach net-zero by mid-century, which will require us to decarbonize very rapidly.

First, we have to make significant reductions to our emissions through efficiency measures. ClimateWorks’ modeling shows that practically every sector of the economy provides emissions reductions possibilities. Second, there will remain some emissions that are hard or prohibitively expensive to reduce – residual emissions – which we have to balance in some way. Finally, this is not going to be enough to bring down the atmospheric concentration of CO2 consistent with a 1.5C scenario, so we need negative emissions beyond net-zero to remove legacy carbon from the atmosphere to reach our goal.

Let’s keep in mind that some sectors and geographies, notably the global south, might need more time to meet these targets, so from a climate equity standpoint, developed nations and the private sector have an obligation to strive for net-zero earlier.

Net-zero commitments

When a country or a company announces a net-zero commitment by a certain date, they’re saying that they will reduce their emissions to the extent possible and will remove any residual emissions by that date. Sounds clear enough – except that the devil is in the details and these commitments can be quite variable in their actual impact. To make sense of these commitments, let us unpack them:

  • Which emissions are being considered? In carbon accounting parlance, is it Scopes 1 (direct emissions), 2 (indirect emissions on account of purchased electricity, steam, heating and cooling) and 3 (indirect emissions in the value chain)?
  • How are these emissions going to be reduced? Scopes 1 and 2 are arguably within the company’s control, but how will Scope 3 reductions be achieved?
  • How will residuals be offset? How robust are the carbon removal solutions envisaged? Are they truly maximizing reductions before using offsets? And what accountability is there in the offsets being used?
  • What about historic emissions? Will there be any effort made to account for and remove the legacy carbon emissions already in the atmosphere?
  • What are the milestones? Are there interim, more near-term targets to ensure that the longer-term commitments are on track?

Carbon removal and carbon offsets

Forests and nature-based solutions are age-old and regulate the planet’s CO2, while providing benefits to soil and water conservation. However, research from MIT indicates that offset programs through such solutions can significantly overstate carbon reductions. Technology-based carbon removal solutions would provide more permanent sequestration but are currently considerably more expensive. And there’s potential moral hazard: it may be cheaper for companies to buy offsets than do the really hard work of decarbonization in shipping or supply chains. Many feel that carbon sinks should be the last resort and limited to sectors that are really hard to decarbonize like aviation, heavy industry and methane from agriculture.

Getting to net-zero

Participants in our break-out didn’t need to be convinced of the need for net-zero, but most are grappling with how to implement this in practice. Many impact investees are small emerging companies that are just beginning to internalize climate and resilience considerations. Measurement and metrics are a huge challenge and pain point, and there is a real need for clear accounting protocols and tools that are adapted to the needs of small business. And measurement is just the first step!

It’s great that Confluence made net-zero the centerpiece of the Climate Solutions Summit – now we’re looking to the team to help us get there.

This post was originally published on Confluence Philanthropy’s blog here.