Zero is an ambitious target when it comes to greenhouse gas emissions and evidence points to market-based instruments such as offsetting being a step in that direction.

A Closer Look At What Zero Greenhouse Gas Emissions Means

Zero is a number that signifies nothing, zilch, nada. But in the context of climate change, zero is a big number in terms of ambition and importance. It is ambitious because we are talking about the transformation of our economy into one that does not contribute a single extra tonne of greenhouse gases into the atmosphere. And it is important because the governments of the world have committed to zero in the Paris Agreement.

This was the message given by Marion Verles, CEO of Gold Standard, as she opened the organisation’s Grow to Zero conference last month. As Marion acknowledged, as well as being ambitious and important, zero is also complex in the case of climate action, with much debate about the best solutions to get there.

The Paris Agreement commits countries to "achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century" [1]. By talking about balancing emissions and sinks it commits countries to "net zero". A leaked draft of a forthcoming report by the UN’s scientific body the IPCC, put an even stricter timeline on this, saying that limiting climate change to a 1.5-degree increase implies “global CO2 emissions… reaching net zero around or shortly after the middle of the 21st century” [2].

Why “net zero” and not just “zero”? 

As the abatement cost curves indicate [3], both at a company level and at a global level there are a range of measures to reduce emissions and those measures have different costs. To reduce net GHG emissions to zero it makes sense to deliver the most rapid, cost effective activities now, that draw-down carbon in a way that’s measured with the highest level of environmental integrity.

This is the principle that has driven thousands of companies to add external emission reductions, technically called “market-based instruments”, in addition to internal reductions. A company can rapidly meet a significant reduction target, and have an effect on the world’s greenhouse gas emissions now, while also pursuing the more complex, long term internal reduction measures that are required. Many have offset to go to net zero, the conditions for which are laid out in The CarbonNeutral Protocol, which defines what companies should count when making a net zero claim. 

Net zero leads to zero

Those companies going beyond regulatory compliance with the help of one of the most common market-based instruments, carbon credits, are more likely to undertake measures that put them on a path to zero internally. 

Evidence of this comes from Forest Trends' Ecosystem Marketplace, which periodically analyses [4] the companies that disclose information through the Carbon Disclosure Project (CDP) about their carbon emissions and efforts to reduce them. CDP companies that use carbon credits are more likely to:

Preliminary data presented at the Grow to Zero conference from its forthcoming report which analysed the 1,923 companies that reported to CDP in 2016, not only indicated that these trends have continued but included new analysis indicating that companies offsetting beyond compliance invest more than double the amount of money into emissions reductions.

There's a logic to this. A recent case study by UC-Berkeley Haas School of Business published by the Harvard Business Review looked at how Patagonia will go carbon neutral. It explained: "The cost of the offsets puts a price on carbon and creates an incentive for companies to reduce their emissions and, over time, their offset purchases… establishing a reference price for carbon emissions that it can use to identify the best ways to eliminate emissions from its operations and supply chain" [5]. 

If the world is going to get to net zero quickly to avoid dangerous climate change, then we need to get there in the way that minimises cost and social disruption – like that which would be caused by suddenly shutting down industries. Market-based instruments maximise action taken by emitters now to respond to the need for urgent action now [6], as well as help to set an internal price on their greenhouse gas externalities.

 

The Grow to Zero conference was organised by Gold Standard, which was established in 2003 by WWF, SouthSouthNorth and HELIO to ensure the Clean Development Mechanism operated at the highest level of environmental integrity and today is a leading verifier of emissions reductions. It has expanded its focus to measuring the Sustainable Development Goal benefits that carbon finance projects have as well as reductions made within the supply chains of companies. Find out more about Gold Standard.

Gold Standard is one of the four standards used by our carbon finance projects, the others being Verra (VCS), Climate Action Reserve and American Carbon Registry. Find out more about our carbon finance projects.

 

[1] UNFCCC, Paris Agreement, 2015
[2] Climate Change News, Intergovernmental Panel on Climate Change (IPCC) Special Report on 1.5C - draft summary for policymakers, 2018
[3] McKinsey & Company, Pathways to a low-carbon economy: Version 2 of the global greenhouse gas abatement cost curve, 2013
[4] Forest Trends Ecosystem Marketplace, The Bottom Line: Taking Stock of the Role of Offsets in Corporate Carbon Strategies, 2015
[5] (Paywall) Berkley Haas Case Series/Harvard Business Review, Patagonia’s Path to Carbon Neutrality by 2025, 2018
[6] ClimateWorks Foundation, GHG Emissions Projections through 2050, 2017

Image copyright: (left) Gold Standard (right) Underdogs United