What does net zero mean?

Every time the Intergovernmental Panel on Climate Change (IPCC) comes out with a report, the news is grim: more needs to be done to contain global warming, and faster. The cross-border group was established to provide policy- and decision-makers with the latest scientific information on man-made climate change and it has repeatedly advised countries and businesses to take action to reduce greenhouse gas emissions. According to the world body: “The global temperature will stabilize when carbon dioxide emissions reach net zero. For 1.5°C (2.7°F), this means achieving net zero carbon dioxide emissions globally in the early 2050s.”

What does net zero mean?

In theory, achieving net zero carbon emissions is a fairly simple concept—it is the balance between carbon emissions produced by transportation, manufacturing, agriculture, etc., and the amount of emissions removed from the world’s atmosphere. “Net zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions reabsorbed from the atmosphere, by oceans and forests for instance,” says the United Nations Net Zero Coalition.

By the numbers, this means global carbon emissions need to decrease by 45% within the next eight years in order for the world to reach net zero by the 2050s.

Absolute zero emissions, rather than calculating net emissions, is an unrealistic goal. There are a number of possible issues with the combination and scale of technologies we need to use to reduce carbon emissions, including whether they are cost-efective, produce emissions themselves, or simply do not exist yet. The pace at which countries and businesses can decarbonize, and the world’s growing population and the resultant demands on a variety of industries, are also factors which make achieving net, rather than absolute, zero a more attainable goal.

Some level of emissions is unavoidable, such as from industries like aviation, manufacturing, and agriculture, but calculating net zero emissions allows the world to continue to innovate technologies and transform industries in a logical process.

Working with nature and using it to help itself

How do we get to net zero though? Removing carbon emissions from the atmosphere is an obvious first step, but how do we do that in a way that does not disrupt the environment and cause collateral damage?

Nature-based solutions have the advantage of working with nature to conserve biodiversity as well as restore ecosystems. Lisa Walker, CEO of Ecosphere+, a B corp helping businesses integrate nature-based solutions, says moving money into these types of projects on the road to net zero “is the most immediate and tangible solution available to businesses looking to take action and without the role played by nature, the climate goalposts move even further away.”

While moving funding quickly and into projects with verifiable results is crucial,

The global temperature will stabilize when carbon dioxide emissions reach net zero. For 1.5°C (2.7°F), this means achieving net zero carbon dioxide emissions globally in the early 2050s.”

so is “long-term and scalable carbon storage whilst also addressing deforestation and ecosystem restoration,” according to Ariel Perez, managing partner at Vertree, a company concentrating on projects combating deforestation. Taking into account the nature of a particular ecosystem, so to speak, will be one of the more important tools used to get the world closer to net zero.

However, nature-based solutions are not a panacea for the problem of emissions reduction, capture, and storage. The world has a diverse set of environments, players, and economies and will need just as diverse a set of solutions to address reduction goals.

A 2022 report by McKinsey for the Coalition for Negative Emissions stated, “It’s increasingly clear that realizing a pathway to 1.5°C of warming will also involve removing carbon dioxide from the atmosphere.” Earlier iterations of carbon capture and storage posed issues with storing emissions underground, but the “negative emissions technology,” as Will Gardiner, CEO of Drax, a power generation company, describes it, has evolved to become more sustainable and permanent.

The solution growing in popularity is bioenergy with carbon capture and storage (BECCS), what the IPCC calls a “savior technology.” Gardiner is not so quick to canonize it, recognizing the need for a number of solutions and technologies to achieve net zero, but does note that BECCS offers a unique “dual benefit.”

BECCS is the only such technology currently available that both removes and permanently stores carbon emissions in sustainable biomass—any renewable organic material from plants and animals—and also has the capability of generating power on a 24/7 basis. The latter sets it apart from other renewable energy sources dependent on the number of daylight hours or wind conditions.

As Gardiner explains, BECCS can help remove emissions while also meeting growing renewable electricity demands as other industries like transportation, heating, and construction work towards decarbonization. It is because of its dual power that Gardiner notes BECCS has the unique capability to offset emissions from industries like aviation and agriculture, in which moving away from high carbon emissions is more complicated and takes more time.

Since the removal and storage of emissions through BECCS is “high integrity and permanent,” Gardiner says, the carbon credits provided by companies like Drax can also help other companies as they try to achieve net zero. He explains it is part of the reason BECCS presents a trillion dollar market opportunity.

BECCS works well in places like the United States and the United Kingdom, which have dense wooded areas and sustainable forest areas, but it will take more than just nature-based solutions and negative emissions technologies to push us towards net zero. These are just tools, but the world needs people, businesses, and countries to work together with these tools as well.

It’s increasingly clear that realizing a pathway to 1.5°C of warming will also involve removing carbon dioxide from the atmosphere.”

Embracing the challenge together, across sectors

If this sounds like a daunting task, it is. The pathway to achieving net zero carbon emissions will involve fundamentally changing the nature of the global economy in a significant way while capturing emissions, incorporating more reliance on biofuels and renewable energy sources, and shifting the behavior of governments, businesses, and individuals.

To put it another way: “Accomplishing this ambition depends on continuing progress on commercially viable technology; government policy; successful negotiations for carbon capture and storage (CCS) and nature-based projects; availability of cost-effective, verifiable offsets in the global market; and granting of necessary permits by governing authorities,” per Jeff Gustavson, President of Chevron New Energies.

Revolutionizing the energy sector, which accounts for about 75% of all carbon dioxide emissions according to the World Resources Institute, is perhaps the largest part of the puzzle of how the world can save itself from what the IPCC has called the “catastrophic” effects of climate change.

However, that is only one piece of a larger puzzle, according to Dirk Forrister, President and CEO of the International Emissions Trading Association (IETA). “Net zero will not be achieved in silos.

Net zero emissions, not net zero partnerships,” Forrister says.

At the political level, the United States, China, and the European Union—the world’s largest polluters—have all set net zero targets. These three account for more than three-quarters of the world’s carbon emissions, but the UN points out it is still not enough to contain global warming because of policy challenges and the speed at which the transition to a cleaner, greener economy needs to occur.

Per the UN Framework Convention on Climate Change (UNFCCC)’s synthesis report from the organization’s last conference, held in Glasgow, Scotland, in 2021, the current national climate strategies of all 193 Parties that have signed the Paris Agreement would still lead to an almost 14% increase in carbon emissions within the next decade, as compared to the last.

As Forrister explains, net zero “is also about markets and collaboration across industries and borders ... cooperation is a must in order to make really ambitious targets [for carbon emissions reduction] feasible.” To wit, thousands of local and city governments, businesses, educational centers, and financial institutions have stepped up to fill the gap left by national governments and pledged targets to achieve net zero carbon emissions based on climate science.

A flexible mindset is also important when it comes to partnering on this pathway to net zero. The energy sector cannot overhaul itself, by itself, as the global economy continues to be over-reliant on fossil fuels. Ken Newcombe, CEO of social impact project developer C-Quest Capital, understands the pathway to net zero can sometimes make for, if not strange, at least unexpected bedfellows. C-Quest has a number of projects in its portfolio as it sets out to become the

Net zero will not be achieved in silos. Net zero emissions, not net zero partnerships.”

“supplier of sustainable energy and land management systems” in the developing world, particularly in Africa—including a few partnering with Shell and BP.

“I am prepared to become partners with any company that is serious,” says Newcombe, adding that companies like Shell and BP are often the most familiar with what others would deem the riskiest markets in the world and also have the capital needed to push those markets towards a more sustainable future.

Net zero is good business

While there are companies which are pledging emissions targets in order to save the planet, the motivation is not purely environmental—it also makes financial sense. Carbon trading can be an increasingly lucrative opportunity for businesses and climate finance is a crucial part of driving the world further along the pathway to net zero.

For many businesses, this is and will be on a voluntary basis as customer and investor pressure to address climate change and reduce emissions increases.

This shift in the financial world comes as “the penny started to drop on the systemic risk of climate change,” says Forrister. Gene Hoffman, COO and President of Chia Network, a sustainable blockchain company, says addressing climate risk is “an existential issue and should be a core consideration and an elemental building block for the financial system’s evolution.”

While businesses in sectors like energy or manufacturing may see the need to comply with government regulations regarding carbon emissions, the financial sector will necessarily need to adapt. Emissions trading markets develop around policies, as do the players.

Banks and fund managers in particular are facing increased scrutiny and pressure to disclose investments in fossil fuel–related projects from customers. One example is large pension funds in the United States pushing for the divestment of billions of dollars from fossil fuel companies.

It is in the best interest of these financial institutions to tackle the issue now on a voluntary basis, according to Forrister. “You don’t want to be invested in companies facing skyrocketing mitigation costs” as they try to comply with changing

You don’t want to be invested in companies facing skyrocketing mitigation costs.”

emissions reduction requirements.

However, as William Pazos, Co-Founder and Managing Director of AirCarbon Exchange (ACX), points out, “transparency, accountability and traceability underpin the Voluntary Carbon Market.” Singapore-based ACX brings the infrastructure of a commodities market to the carbon market as a way of makingemissions trading more familiar to traders comfortable with the protections and clarity of a commodities market.

“A secure and auditable environment” is also what Hoffman and ACX are working towards for cryptocurrency. Having a regulatory framework similar to those of traditional markets and “quality benchmarking for carbon credits” in place by organizations like the World Bank and International Finance Corporation (IFC) is what will make financing projects along the road to net zero easier, Hoffman explains.

Solar, wind, and geothermal energies as well as BECCS need more investment at a faster rate to reach science-based targets by 2030—not just for further development of baseline technology, but also for implementation, maintenance, storage, and scalability. Governments are already funding portions of these projects, but the financial sector’s role in helping companies access the carbon market easily could help more businesses pursue net-zero ambitions.

A future “beyond carbon” is about uplifting the world’s poorest

While climate finance is an important part of the package of solutions which need to be deployed in order to get to net zero carbon emissions, there also has to be an eye on the world “beyond carbon,” as Newcombe puts it. Climate finance is focused on creating and selling carbon credits; “It is a means to an end,” the C-Quest CEO points out.

“We want to be on the other side of that,” he says.

What lies beyond climate finance is a cleaner, greener, more sustainable global economy for all, which needs to include the billions of people living at the “bottom of the pyramid.” As CEO of Carbonext Janaina Dallan explains, the pathway to net zero “is about so much more than avoiding emissions.”

As long as energy sources like coal and firewood used in traditional cookstoves continue to be inexpensive, methaneintense and land-stripping agricultural practices remain in place because of a lack of alternatives, and selling land for deforestation is the only option for survival, net zero will remain an elusive—or at least an even more difficult—goal to

framework traditional Having markets similar a regulatory to a ‘quality benchmarking or carbon credits’ in place by organizations like the World Bank and International Finance Corporation (IFC) is what will make financing projects along the road to net zero easier.”