Net-Zero Basics
How net-zero differs from zero carbon emissions
5 minute read Net-zero does not mean zeroing out emissions of carbon and other greenhouse gases. Some sectors of the economy such as transportation or cement production may continue to rely on fossil fuels even if much of the rest of the economy has phased them out.
- What COP26 may mean for institutional investors
- How renewable energy is stranding coal
- Coal consumption is on track to rise in 2021
- Why banks are critical to reaching global climate goals
- The latest emissions gap report shows the need for bold action
- Investors may need all the tools at their disposal
- Why net-zero matters for investors
- The focus on net-zero is intensifying
- How investors can drive the transition to net-zero
- How net-zero differs from zero carbon emissions
- Estimated costs and opportunities of climate change
- The tie between climate change and biodiversity
Net-zero is different
A net-zero economy would remove as much greenhouse gas from the atmosphere as it puts in. Even if the world achieves net-zero emissions, some activities will still produce greenhouse gases. In his book “How to Avoid a Climate Disaster,” Bill Gates, the co-founder of Microsoft, cites things like making cement, using fertilizer, or the methane that leaks from natural gas plants. The reality that net-zero will not mean zeroing out all emissions highlights the need for carbon removal, whether from natural sources such as trees and soil, or via technologies that can pull carbon from the atmosphere. The planet would be unable to reach net-zero without actively removing carbon from the atmosphere.
About carbon offsets, capture and storage
An offset is a certificate representing the reduction of one metric ton of CO2 equivalent. Offsets may include projects that avoid emissions, such as by using renewable energy instead of energy derived from fossil fuels, or that remove emissions, such as planting trees or storing methane.
There is no single global standard for offsets. Still, investors can determine whether a company uses offsets to counter carbon emissions and, if so, assess how the company intends to use the offset to reduce its carbon footprint. The analysis may show that a planned offset won’t help the environment. Buying trees that were not going to be harvested, for instance, won’t absorb any additional carbon from the atmosphere. That highlights a need for measurement, recording and verification.
Negotiators at COP26 are expected to address how market-based mechanisms could allow countries (and companies) to use offsets to meet Paris-aligned goals.
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