The difference between carbon neutrality and net-zero

Antonia Adamik
5 min readApr 8, 2022

The article in short:

  • Carbon neutrality refers to CO2 reductions (negative emissions) counterbalancing CO2 emissions
  • Net-zero or climate neutrality is achieved, when reductions over more equalize other GHG emissions, too
  • Corporate net-zero commitments gain in popularity; many countries have already pledged to become net-zero at some point in the future
  • Companies have 4 levers at their disposal to reduce their emissions: Internal reduction, insetting, compensation via avoiding and compensation via removing carbon emissions
  • Companies should focus on internal reductions first, before relying on compensation
  • Avoidance and removal both have their pros and cons, but for the world to become net-zero in the long term, true negative emissions are only achieved via removal

Difference between carbon neutrality and net-zero

Discussions surrounding efforts to limit global warming are frequently communicated in terms of the point in time at which net anthropogenic (i.e. human-made) CO2 emissions reach zero, also called carbon neutrality. Carbon neutrality is oftentimes accompanied by substantial reductions in non-CO2 emissions but does not necessarily have to. Net-zero greenhouse gas (GHG) emission goals, also called net-zero commitments or climate neutrality, cover the other important anthropogenic GHGs, namely methane (CH4), nitrous oxide (N2O), and fluorinated gases (F-gases).

Sources: IPCC WG III report on Mitigation of Climate Change, IPPC report on Changes in Atmospheric Constituents and Radiative Forcing

Corporate and government commitments

Corporate net-zero commitments become increasingly common and require net-negative CO2 emissions to compensate for residual non-CO2 emissions. Achieving either carbon or climate neutrality goals can, but does not necessarily have to, be certified by trademarks like the Climate Neutral Standard, the Climate Neutral Company Standard, and others. A very well-known open standard is the PAS 2060 carbon neutrality standard. Companies are also free to set up own targets: The Science Based Targets initiative lays out a set of rules on how ambitious goals aligned with sectoral emission goals set forth by academia and international institutions should be elaborated.

Carbon neutrality vs. net-zero

Economy-wide CO2 and GHG goals already appear in many government decarbonization strategies, but they should be achieved sooner rather than later to limit global warming to at most 2°C, or even better still 1.5°C.

Source: Energy & Climate Intelligence Unit

Carbon dioxide reduction measures

Scenarios where economy-wide CO2 emissions reach net-zero highly depend on unknown future conditions like population, economic growth, and technological change. The energy system will very likely not be the only source or sink of CO2 emissions. Carbon dioxide reduction (CDR) methods are currently being implemented to achieve net-zero goals. Terrestrial systems emit and store carbon too, and CDR options like BECCS (Bioenergy with Carbon Capture & Storage) and DACCS (Direct Air Carbon Capture and Storage) can be used to capture and store CO2, leading to negative emissions. Other CDR methods are deployed outside of the energy system such as the so-called AFOLU methods (Agriculture, Forestry and Other Land Use), including afforestation/reforestation, less deforestation (not considered removing CO2, but avoiding the emittance of the latter), soil carbon, and coastal or blue carbon. Hence, should global emissions reach net-zero, the remaining range for fossil energy to persist is determined by the deployment and scalability of CDR options.

Adapted from: IPCC WG III report on Mitigation of Climate Change

For companies to get active, there exist four possibilities for carbon reduction. The first one is internal reduction, which means that the company reduces emissions of its operations, e.g., by switching its fleet from combustion to electric vehicles powered by green electricity. Any reputable advisor in the sustainability sector would acknowledge that this is the single most crucial and first measure to take when striving to improve a company’s footprint — and so do we. The second measure is insetting, relating to activities that help suppliers in the company’s upstream value chain to reduce carbon emissions. This leads to lowering the carbon footprint of, e.g., the products the company intends to further process, and hence lowers its scope 3 emissions.

Carbon avoidance vs. removal

Possibilities three and four both relate to carbon compensation activities, meaning that an external carbon reduction measure is quantified in terms of tonne CO2 equivalent (CO2e), traded, and subtracted from the buying company’s gross emissions. The carbon reduction corresponds to either avoiding the emission elsewhere (possibility 3) or removing/sequestering the according amount from the atmosphere (possibility 4). Both options come with their pros and cons: Whereas avoidance projects provide the respective amount of CO2 never gets to the atmosphere in the first place (associated reductions are therefore thought of as “permanent” per se), baseline scenarios against which avoided emissions are calculated must be established without knowing actual future evolutions. An example are Renewable Energy projects in countries such as India, where the baseline scenario corresponds to the current business practice of electricity being generated via fossil energy sources. Buying carbon credits for Renewable Energy projects comes down to putting money into the Indian energy transition, allowing the energy mix to pivot from less carbon-intensive options to sustainable ones. However, the world viewed as a holistic system will not achieve net-zero emissions if avoidance projects were our sole mitigation strategy. They are merely a means to an end.

In contrast, removal projects provide genuine negative emissions, removing CO2 once emitted back from the atmosphere; however, carbon removal projects in general (such as reforestation as part of AFOLU) are always subject to a residual uncertainty regarding permanence, as forests can still burn down, and underground storage of carbon captured via technology-based approaches such as DACCS may face risks we might not even think of just yet (even though it is thought of as one of the most reliable and permanent mitigation solutions).

Adapted from: Swiss Re

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