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.”

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