CO2-neutral doesn’t necessarily mean an effective reduction in total greenhouse gas emissions

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What is the difference between CO₂-neutral and Net Zero targets? We often hear this question in our conversations with clients and partners about sustainability. The terms CO₂-neutral and Net Zero are often used interchangeably, but in actual fact represent completely different approaches to decarbonization and combating climate change.

Does the difference between CO₂-neutral and net zero targets matter?

Achieving Net Zero emissions is urgently needed to reverse the climate crisis. However, for many organizations, the exact meaning of a Net Zero or a CO₂ neutrality target within a business context is still unclear. This lack of clarity can stymie progress. So, let us take a look at the nuances behind these terms and consider why one is better than the other for companies looking to make the biggest impact on the climate.

CO₂-neutral: a starting point for corporate-level climate action

The definition of CO₂-neutral is when a company undertakes to offset the emissions produced by their business operations by an equivalent volume of emissions that are removed from the atmosphere. CO₂-neutral business targets typically encompass only Scope 1 and Scope 2 emissions, which can be tackled through a range of market mechanisms, such as CO₂ offsets.

To earn CO₂-neutral verification (a fifty percent reduction by 2030), a company usually does not need to undertake any decarbonization measures before deploying offsets. In fact, it is possible – albeit rare – for a company to do precious little actual emission reduction and just buy CO₂ offsets to claim CO₂-neutrality status. Apart from that, there is a minimum criteria for what types of CO₂ offsets should be adopted.

Although a number of CO₂-neutrality certification bodies have emerged, a single definition of CO₂-neutral has not yet been officially established. A promise to be CO₂-neutral can be a step in the right direction and is a positive move for companies striving to be CO₂-poor or net zero. That said, it is a vague term and is generally not considered best practice as a way to address the climate crisis.

Net zero: the guide for climate action for businesses

According to the Intergovernmental Panel on Climate Change (IPCC), the official definition of Net Zero emissions is the point at which global greenhouse gas emissions added to the atmosphere by human-caused activities are balanced by anthropogenic extractions over a period of time.

Net Zero targets are drawn from the IPCC climate science reports, recommended by leading frameworks, such as the Science-based Targets Initiative (SBTi), and which formed the specific call to action of the Paris Agreement.

Preventing emissions

At first glance, the definitions of CO₂-neutral and Net Zero seem similar, but the environmental outcomes and level of recognized leadership in climate action are vastly different. What does this distinction actually mean for setting company targets? And why do organizations like the SBTi and COP26 recommend net zero instead of CO₂-neutral?

In a nutshell, the definition of Net Zero entails companies having a better understanding of how to become CO₂-neutral. Companies that commit to net zero emissions promise to bring their Scope 1, 2 and 3 greenhouse gas emissions as close to zero as possible, and then (and only then) neutralize all of the genuinely unavoidable remaining emissions.

Net Zero is intended to signify a step-by-step plan to prevent emissions that contribute to temperature increases of 1.5°C or more, which outlines how quickly companies will need to decarbonize, what emission categories will need to be included, and what market mechanisms are acceptable to address unavoidable emissions.

Terminology matters

No matter how good the intentions, any commitment to CO₂-neutral does not necessarily mean an actual reduction in total greenhouse gas emissions. Through the use of Energy Attribute Certificates (EACs) and offsets, a company can technically be CO₂-neutral even if its absolute emissions increase. Moreover, even if CO₂-neutral were adopted universally, the world would still be unable to keep below the 1.5°C global warming threshold. Conversely, a universal movement toward Net Zero would quickly put the world on track to avoid the worst effects of climate change.

Setting long-term and intermediate goals in order to reach the ultimate goal of net zero can be challenging in terms of understanding where you need to start in order to achieve the required level of decarbonization.