Net Zero Basics: Is our eye really on the prize?

Net zero emissions by 2050 is the collective goal for the world under the Paris Agreement, but the way we track emissions may be an obstacle.

The term “net zero” has received considerable attention from the global community of climate watchers in recent years. The IEA’s Net Zero 2050 report and scenario has garnered significant attention, with its shift to a bold recommendation to stop all new investments in fossil fuels. A host of countries, states, provinces, cities and corporations have pledged to achieve “net zero emissions” as part of their efforts to combat climate change, earning praise and scrutiny in equal measures. However, for all its popularity, the details around “net zero” remain fuzzy.

What does “net zero” mean?

When a government or business commits to reaching net zero, it is pledging to remove the same amount of carbon dioxide (CO2) or greenhouse gas (GHG) emissions from the atmosphere as it adds. Such a goal can be achieved by both reducing and absorbing emissions in a variety of ways. Currently, according to the ECIU’s Net Zero Tracker, 26 countries have adopted a net-zero target while 104 others are either awaiting legislative approval or still considering it. (A map of these and related targets can be found in REN21’s Renewables 2020 Global status Report in the Policy Chapter.) However, the choice of gases and the type of emitting activities covered by these targets differ vastly. According to a group of leading scientists, this has led to definitions of net zero being too vague to compare them with one another.

China, for example, recently announced a “carbon neutrality” target for 2060, which usually covers carbon dioxide emissions, while leaving out other greenhouse gas emissions. This means China’s target probably excludes methane, another carbon-based greenhouse gas which is 80 times more potent than CO2. Meanwhile, Austria has a 2050 “climate neutrality” target (and the European Union has proposed one) which goes beyond greenhouse gas emissions and seeks to neutralise the impact of human activity on their climate systems as a whole. Some corporations like Microsoft and AstraZeneca have even adopted “net-negative carbon” targets by 2030, meaning that their activities should cumulatively remove more carbon dioxide from the atmosphere than they add by that year. 

Are such targets even achievable?

In theory, absolutely!

A net zero target is different from, say, a “gross zero” target, which would involve completely eliminating emissions. Such an absolute target is not realistic with highly industrialised and rapidly industrialising economies in the world. The goal is thus to achieve emissions neutrality, or net zero emissions, by emitting less and absorbing more.

It is also important to note that not all countries may be able to achieve net zero in the same timeframe. Some are further along in their decarbonisation journeys and will be able to achieve net zero sooner than others, which are facing competing challenges like poverty and energy security. While every country has the responsibility to contribute to the global net zero goal, what each country is able to commit might vastly differ.

Energy use is responsible for around 73% of the world’s GHG emissions. So reducing energy demand by making energy systems more efficient and switching away from fossil fuels to renewable energy are effective ways to reduce emissions. Nature-based solutions can absorb emissions to some extent, but planetary limits prevent them from being reliable ways to eliminate emissions altogether. Technologies that remove carbon from the atmosphere exist but these are not yet commercially viable, and there are currently no technologies that can remove other GHGs from the atmosphere in a similar way. 

Thus, while absorption and removal could play some role in the longer-term, energy efficiency and renewable energy are currently the most direct, feasible and effective paths to net zero.

What is standing in the way of the net zero goal?

Thanks to the way in which net zero goals are framed and emissions are tracked over time, there exist a slew of caveats and loopholes that can potentially be exploited.

The purchase of carbon offsets is a popular one. In a nutshell, this involves paying for a project that reduces emissions anywhere in the world to compensate for a particular polluting activity. Whoever purchases the offset gets to claim credit for reducing carbon emissions without actually having to do so. Relying on offsets could thus render net zero targets meaningless and allow rich countries to decarbonise at the expense of poorer ones.

Moreover, the way in which countries track their emissions leaves much to be desired. Emissions are tracked on a “territorial” basis, meaning that net zero targets are only concerned with emissions produced within a particular jurisdiction or territory. This method obviously leaves out all emissions arising from the products and services consumed in the territory but produced elsewhere. The shipping and aviation industries, which are significant contributors to global emissions, are also excluded from such accounting. This also paves the way for cross-border carbon leakage, through which countries can simply relocate their polluting activities to other jurisdictions where environmental standards are lower without having to take ownership for the resulting emissions. In effect, the production-based accounting method leaves a significant proportion of emissions unaccounted for.

How can emissions be tracked better?

A more comprehensive accounting of global emissions can be achieved by using a combination of methods. The consumption-based approach accounts for emissions embodied in the goods and services consumed within a territory. This would cover all emissions imported through international trade, including those arising from the transit of internationally traded goods through shipping and aviation. However, the consumption-based method is far more difficult for countries to track and influence than their “territorial” emissions, so they tend to favour the production-based method.

For example, while the EU does not use the consumption-based accounting method, it has acknowledged the need to reduce the carbon footprint of the products consumed in the region. The EU has proposed a “carbon border adjustment mechanism” (often referred to as the border tax) to discourage consumption of foreign products and services that have high carbon footprints. However, this proposed mechanism has raised questions of equity and fairness towards emerging economies and seems unlikely to be adopted unless reformed.

Another emissions accounting approach is ownership-based. Recommended by researchers studying Chinese overseas coal finance, the principle behind such an approach is that emissions arising from all goods and services owned by a country should count towards its national emissions balance, irrespective of where these are located. As per this principle, countries like China, Japan and South Korea would need to stop engaging in cross-border carbon leakage (for example, investing in fossil fuels overseas) in order to achieve their net zero targets. (Unless, of course, they purchase carbon offsets!)

A net zero target cannot impact what it does not measure. 

While territorial emissions are best influenced by laws and public regulations, net zero targets based only on production are misleading and of limited value. Countries have little incentive to prioritise the decarbonisation of sectors that are not covered by their net zero targets. This means that high-emitting sectors like shipping and aviation will remain carbon-intensive for a long time to come. Moreover, countries will continue to invest in fossil fuel infrastructure in other countries with lower environmental standards, hindering the latter’s ability to successfully decarbonise and shirking their own responsibility for the resulting emissions. To provide the full picture, countries must report on their consumption- and ownership-based emissions as well. Without this, the global 2050 carbon neutrality target seems elusive.


Article written by Chetna Hareesh Kumar.