Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Many countries and companies have promised to achieve net-zero
emissions later this century. What do those pledges mean, exactly,
and why do they matter?
According to the Paris Agreement, the world needs to limit
global warming to well below 2 degrees Celsius and pursues a 1.5
degrees Celsius increase above pre-industrial levels to avoid
climate disasters. UN scientists say the 1.5-degree goal can be
reached with a global balance between anthropogenic emissions by
sources and removals by GHG sinks before 2050—and describe the
emissions status as "net zero."
And the term has come into fashion amid growing environmental
awareness. Net Zero Tracker, a data project developed by
the Data-Driven EnviroLab, the Energy & Climate Intelligence
Unit, NewClimate Institute, and Oxford Net Zero, revealed that 136
countries and 681 firms set net-zero climate goals as of
end-November.
When it comes down to individual pledges, each nation and
company often has its own interpretation of emissions and removal
methodology, though. Their cumulative climate benefits are thus in
doubt, according to policy experts.
Thomas Hale, an associate professor in public policy at Oxford
University, suggested the challenges lie in measuring the pledges'
merits and implementing them.
"We've reached the 'end of the beginning' of net zero. Net zero
targets have become universal in a remarkably short period of time,
but now we are in the messy phase of operationalization," Hale who
specializes in climate policy told Net-Zero Business
Daily.
Net Zero Tracker's project lead John Lang said he observed "an
information vacuum on what constitutes a credible net zero target,"
which resulted in "a wide range of targets largely devoid of
scrutiny."
Many believe the varied definitions are due to a lack of common
standards and greenwashing by some players.
"There is indeed a lack of standardized definition in relation
to…net-zero claims, and that provides the space for messaging that
may not add up to a correct interpretation of the concept," said
Pedro Martins Barata, senior director of climate policy at
non-profit Environmental Defense Fund (EDF).
Hale called on governments and the private sector to establish
carbon accounting rules to ensure the integrity of climate pledges.
"Unless clear standards are established, there is a risk that this
greenwashing will discredit the scientific idea of net zero
overall, which would represent a serious setback," he said.
Governments under scrutiny
At the national level, a joint study by the
Organisation for Economic Co-operation and Development (OECD) and
International Energy Agency (IEA) on 51 net-zero pledges found
countries tend to describe their targets with vague, inconsistent
terms.
For example, France uses "carbon neutrality" in its law to refer
to net-zero GHG emissions, while other countries generally prefer
"climate neutrality" or "net-zero emissions".
China's carbon neutrality means net-zero CO2 emissions in its
policy document, but the country leaves open the possibility of
including other types of GHGs in its target in some public
announcements.
"The terminology used in some cases is misleading or confusing,"
the OECD and IEA said.
Sometimes, national governments opt to exclude specific GHGs
from their targets. New Zealand has a separate target for biogenic
methane to protect its farming sector.
Most climate goals cover economy-wide emissions and exclude
emissions from international aviation and shipping. But there are
exceptions: for instance, Sweden does not factor in emissions from
the land use, land use change and forestry sector, with much of its
land covered by forests.
"The lack of a common, easily understood set of standards has
important implications for the strength of net zero targets and
whether they're likely to contribute to the temperature goals of
the Paris Agreement," Lang said.
Also, in terms of timelines, rich nations generally aim to reach
their targets by 2050 or earlier. Some developing countries like
China and Indonesia set a deadline of 2060.
Kate Levick, associate director for sustainable finance at
think-tank E3G, said a uniform approach on reaching net-zero goals
could risk being counterproductive as countries have disparate
economies that are in different developmental stages.
However, she agreed that national governments should present
their plans in a consistent and comparable way for the global
community to forecast emissions reductions and assess climate
efforts.
IHS Markit's Executive Director for Climate and Sustainability
Paul McConnell estimated around 91% of global emissions are now
covered by some kinds of net-zero pledges. "But they differ
significantly in strengths, scopes and timings… About the only real
commonality is that they are 'net' zero not '[absolute] zero'," he
said.
Debates on carbon offsets
In theory, countries with net-zero goals are supposed to enter
deep decarbonization before offsetting residual emissions with
carbon removal projects.
But national governments have yet to agree on what the carbon
removal projects should be and how much emissions can be offset
under the UN Framework Convention on Climate Change (UNFCCC).
Aside from the EU and a limited number of countries like Sweden,
Switzerland, and the US, nations have refrained from specifying how
they will reach the final net-zero goals or only provided sketchy
details.
"Greater clarity on the scope, coverage and detail of countries'
net-zero targets, in particular how countries plan to meet their
net-zero commitments, is important to better understand countries'
net-zero targets, how they interact with each other, and their
overall implications for reaching net-zero at the global level,"
the OECD-IEA report said.
During COP26, UN member states agreed to reform carbon reporting
guidelines via the Enhanced Transparency
Framework and adopt common accounting standards from December
2024.
While this is expected to provide clarity on governments'
climate pledges, also known as nationally determined contributions,
most observers do not think countries have the appetite to define
net zero for now.
"I think it would be excellent for the UNFCCC to establish at
least guidelines on this front, but this is unlikely to happen
soon," Hale said.
Governments are dragging their feet partly because of a lack of
consensus over offsetting standards. The Paris Agreement's Article 6 allows countries to
generate carbon credits from additional emissions cuts and sell
those to nations with excess emissions, so all can meet their
climate pledges. But there are no common international criteria for
such credits.
For example, Australia can issue credits from carbon
capture and storage projects linked to fossil fuel production
facilities. In other countries, such projects are generally deemed
domestic emissions reduction efforts rather than offset activity
that can generate credits.
The OECD and IEA said in their joint paper that opinions on
removal credits from nature-based solutions are often divided, and
suggested that credits from avoidance activities—like
deforestation prevention projects—should not be on a country's
net-zero pathway due to the risk of emissions leakage.
In contrast, they said technology-based approaches—such as
direct air capture—could play an increasingly important
role.
NewClimate's Frederic Hans suggested that national government
should aim to establish a common standard on net-zero targets under
the UNFCCC eventually, even though this may not be achievable in
the short run and interim goals should take priority.
"Comprehensive, ambitious, and transparent long-term targets can
provide a useful vision and framework on where a society aims to
transition towards," he said.
Wild, Wild West
Governments aren't the only ones struggling to define net-zero
goals. While the private sector has seen an explosive growth in the
number of companies pledging to reach net zero, the commitments
come in different shapes and forms.
Some are willing to provide detailed decarbonization proposals,
set interim and midcentury Scope 1, 2, and 3 targets, and work with
third-party assurers to monitor their own progress. But many are
vague in their commitments and accused by environmentalists of
greenwashing.
"For many corporate actors, we currently see various poorly
designed targets with multiple loopholes to avoid real emission…and
a lack of transparency. This includes incomplete information on
emissions covered by the target and the use of offset credits
claiming 'neutralization,'" Hans said.
"While better standards and guidance can help actors to improve
their target setting and achieve ambitious action on the ground,
independent analyses will be essential to identify and call out
corporate greenwashing activities around misleading net zero
claims."
In late October, the Science Based Targets initiative (SBTi) launched what it described as
the world's first Net-Zero Corporate Standard, which aims to verify
whether a company's climate pledge aligns with the Paris agreement.
At least seven companies, including AstraZeneca and Ørsted, have
become early adopters.
The SBTi, launched by non-profit CDP, the UN Global Impact,
World Resources Institute, and the World Wide Fund for Nature,
believes companies need to halve emissions before 2030 and cut
emissions by 90%-95% by 2050 to avoid climate disasters. But the
standard also allows corporates to offset the remaining emissions
with technological removals and nature-based solutions.
Alberto Carrillo Pineda, managing director at the SBTi, told
Net-Zero Business Daily that this was only the initial
step to enhance the integrity of corporate net-zero claims.
"We see the enthusiasm in the business sector around net zero,
but also the diversity and inconsistency in which net zero is
currently being approached," Pineda said. "Our criteria are not
intended to be prescriptive…they need to be further developed [as
technologies evolve]."
So far, industry initiatives like the Task Force on
Climate-related Financial Disclosures and the Impact Management
Project (which is transferring its activity to the Impact Management Platform)
have largely focused on enhancing reporting standards for companies
that want to achieve net zero.
There are also examples of industry participants taking
initiatives to strengthen climate claims in the private sector.
The International Standards Organization, which publishes nearly
24,000 standards across various sectors, has promised to ensure its standards to meet
climate criteria aligned with the Paris Agreement.
In November, the International Group of Liquefied Natural Gas
Importers unveiled an emissions framework
to improve the climate credentials of carbon-neutral LNG shipments,
demand for which was growing from Northeast Asian importers.
Role of regulators
During COP26, UN Secretary General Antonio Guterres announced his plan to establish
an expert group to propose clear standards to measure and analyze
net zero commitments from companies.
"There is a deficit of credibility and a surplus of confusion
over emissions reductions and net zero targets, with different
meanings and different metrics," Guterres said. "We must now zoom
in on the quality and implementation of plans. On measuring and
analyzing. On reporting, transparency and accountability."
The expert group is due to recommend net-zero criteria for the
private sector next year. However, some policy experts suggested
national governments could be better positioned than the UNFCCC to
regulate private trades.
"The option is always available for countries to regulate
companies in relation to these [climate] claims and there is
emerging pressure by civil society, in light of the disparity of
claims, for national governments to do just that," EDF's Barata
said.
"Whether or not governments will be called to regulate depends
in large part on how successful the efforts at standardizing and
self-regulating [are] in avoiding glaring misrepresentations of
'net zero'," he added.
NewClimate's Thomas Day said national governments might need to
establish common and robust standards for the private sector by
themselves even though an international guidance could be
beneficial.
"The courts and advertising standard watchdogs in various
countries are receiving increasing volumes of complaints about
companies' climate claims, and do not have a consistent framework
against which to make judgements," Day said.
"We would clearly not propose to just leave this to the private
sector to self-regulate," he added. "This has been the approach to
date, and leads to the continued emergence of new narratives,
approaches and loopholes, that consumers and observers cannot keep
track with."
Many countries, including South Korea and the UK, have been
tightening climate reporting rules for listed companies. There have
also been discussions among central bankers on adopting monetary policies that
can promote green transition, but nothing definitive has come out
yet. A number of central banks have already started engaging in
stress tests to test the resiliency of financial systems against
climate-induced shocks.
With countries yet to define net zero clearly themselves, some
expect governments to provide checks on corporate climate claims
via the financial sector rather than establish direct
regulations.
"What we are now starting to see is a shift towards the
enforcement of integrity being in the hands of the financial
regulators which supervise financial firms and listed companies,"
Levick said.
McConnell said it could be a long way off before governments can
clearly define net zero in legislations for the private sector. "I
think common standards—or at least definitions—will start
to emerge. But it will take time. Net zero is a pretty new concept,
and there's no real formalized definition or approach yet," he
said.
Outlook for net-zero governance
Despite all the pitfalls, Lang suggested net-zero pledges by
governments and corporations are overall positive to climate
efforts. The key is to continue exerting pressure on them to
improve emissions disclosures and refine decarbonization plans, he
added.
"In some quarters, net zero targets are undoubtedly being set
for PR [public relations] reasons," Lang said. "But even if some
aren't set in good faith now, expectations and accountability
dynamics are being created.
"Providing transparency on, for example, the credibility of
plans, scopes of coverage and the intended use of carbon offsets,
will help accelerate efforts to benchmark targets and forge more
uniformity going forward," he added.
Hale believes that voluntary private schemes, international
standards, government regulations, and UN-led orchestration efforts
should complement one another in what he described as a governance
"ecosystem" for net-zero pledges, rather than to rely on a dominant
regulatory force.
"There is no scientific answer on the single, 'right' path to
net zero for a given country, sector, company, city, or region," he
said.
Principally, all countries and companies should aim to reduce
emissions aggressively by 2030 and not rely on offsets to
substitute for or delay emissions cuts, according to Hale. But he
admitted no one can know exactly what mix of technologies, rules,
and behavioral shifts can deliver a net-zero world by
midcentury.
"This uncertainty means that governance of net zero needs to be
adaptive and dynamic…Regulation that is too static risks creating
unintended barriers to achieving net zero in the decades to come,"
Hale said.
Posted 01 December 2021 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability