Net Zero for a green economy
But, what exactly is ‘net zero’? ‘Net zero’ refers to achieving an overall balance between emissions produced and emissions taken out of the atmosphere.
Net emissions = Total carbon released less total carbon taken out of the atmosphere
As long as carbon released equals carbon taken out of atmosphere , we are net zero. Else we are net positive as is the case today. As a society we would like to be net negative but that is long way off. There are two ways to achieve net zero carbon emissions. Firstly, by attacking the first part of the equation. Here, one can reduce or stop releasing GHGs by cutting emissions and shifting to green energy sources such as solar and wind.
Or one can attack the second part of the equation by removing CO2 from the atmosphere through natural solutions such as reforestation or through technology such as carbon capture technologies. This takes into account that some emissions are produced by ‘hard-to-mitigate’ sectors, such as steel manufacturing and aviation, where reducing emissions is either too expensive, technologically too complex or simply not possible. Here, carbon capture and storage technologies can come into play, which can capture the carbon released and ensure that it is converted into a compressed liquid state and stored. Nature-based solutions can be used effectively to remove carbon. These include planting trees and forests, better farming techniques, seaweed forests, peatbogs and mangroves. At a macro level, it does not matter which part of the world the action is being undertaken. Increases in carbon emissions in China can be matched against carbon reduction through increased afforestation in the Amazon or increased use of solar and wind energy in Europe. As long as we are net zero or carbon neutral at a global level, we should be fine.
Translating the concept of net zero is relatively more difficult when it comes to companies. However, the basic principle remains the same.
Net emissions = Emissions caused by company less credits for carbon reduction or carbon reduction activities
If the emissions equal the credits, then the company is said to be net zero. Here carbon credits refer to credits received for reduction in carbon by the company or other companies. The credits are tradeable and enable companies to be net zero. Almost everyone is focusing around ten key things that need to be done. This includes investing in green energy, eliminating waste and halting deforestation among others.
There is a caveat to the measurement business. Measuring net emissions is easier said than done. Many emissions that cannot be measured today will become measurable tomorrow. Also, companies that have started measuring their emissions are doing so gradually. So, today’s emissions may not cover all products, processes, facilities. This means that companies may not have an accurate understanding of how much work needs to be done. This makes the task of achieving net zero more complex. The heartening thing is that companies have started on the path.
According to the EU roadmap, to achieve an 80 per cent reduction in emissions by 2050, investment in clean and energy-efficient technologies needs to increase by 1.5 per cent of GDP per year, or €270 billion. This investment will be largely paid back, or even over-compensated, through lower energy bills; fuel savings amounting to €175-320 billion on average per year by 2050. The low carbon economy will also improve air quality, reducing air pollution control and health care costs by up to €88 billion a year by 2050.1
Today, we have the technologies necessary to reach net zero as solar and wind now provide power for 67 per cent of the world—and it is affordable.2 But, more than technology, we need a shift in policy and behaviour to achieve this. There are many things that can be done to achieve this. For instance, the UK has announced a ten-point green plan that will help create 250,000 jobs. The plan looks at promoting electric cars and green transport, a focus on wind, hydrogen and nuclear power, planting more trees and making London the centre of green finance.3
While great progress has been made on many fronts, a couple of sticking points still remain. First, developing countries need money and technology to progress on net zero. This can come from developed countries. This has been sticking point for most discussions. Second, there are countries where current regulations restrict investment (e.g. Iran) and financing of climate related projects. Mechanisms need to evolve to manage these situations. Finally, governments need political mandates to bring about changes that may create short run shocks. Such mandates are often sticking points. Governments will need to work with their citizens to disseminate information and gain consensus.
Turning to India, where The Economic Survey of India4 is an annual exercise in determining the state of the Indian economy. The discussion on SDGs and climate change in the 2021 document reflect India’s transformative actions that include solar power projects, afforestation, sustainable agriculture and mandatory energy consumption in large energy-consuming industries. India has also become the second largest green bond market after China and has joined the European Commission-led International Platform on Sustainable Finance (IPSF).
Joining hands with the government to take India towards the path of lower greenhouse gas emissions, twenty-four top private companies, including Tata, Reliance, Mahindra, ITC, ACC, Adani and Dalmia Cement, signed a declaration on climate change by voluntarily pledging to move towards ‘carbon neutrality’. The nine mitigation measures announced by these companies include
- promotion of renewable energy,
- enhanced energy efficiency,
- material efficiency,
- improved processes,
- water efficient processes,
- green mobility,
- Research & Development,
- afforestation, and
- waste management.5
1 ‘Roadmap for moving to a competitive low carbon economu in 2050: Key facts and figures’, https://ec.europa.eu/clima/sites/clima/files/strategies/2050/docs/roadmap_fact_sheet_en.pdf
2 ‘Setting the Record Straight About Renewable Energy’, Susan Tierney and Lori Bird, 12 May 2020
3 ‘The Ten Point Plan for a Green Industrial Revolution’, 18 November 2020