• Alternate Approach: Rely on consumption-based Attributes of Net Zero targets

SCR Exam accounting methods, which measure the cumulative

emissions that arise from the production of all goods and • 7 attributes that net-zero targets should have:
cheat sheet services consumed in that country, regardless of where this
production took place
1. Front-loaded emission reductions
2. Comprehensive approach to emission reductions
• There is no globally recognized standard for accounting 3. Cautious use of carbon dioxide removal
Link for Udemy Course on SCR Prep emissions at the sub-national level 4. Effective regulation of carbon offsets
• A widely recognized best-practice standard is the Protocol 5. Equitable transition to net zero
for Community-Scale Greenhouse Gas Emissions 6. Alignment with broader socio-ecological objectives
Introduction to Net Zero
Inventories, published by the GHG Protocol 7. Pursuit of economic opportunities
• The concept of net-zero emissions originally emerged in • The GHG Protocol has developed two GHG reporting • Carbon credit projects face challenges with leakage (i.e.,
scientific discussions on the link between anthropogenic standards for cities and regions - BASIC & BASIC+ displacing rather than avoiding emissions), permanence
emissions and global temperature changes • BASIC level emissions inventories cover scope 1 and 2 (i.e., long-term storage of carbon), and the accurate
• In Article 2.1 of the Paris Agreement, negotiators agreed to emissions from stationary energy and trans port, as well as measurement of the amounts of carbon stored
"hold the increase in global average temperature to well scope 1 and 3 emissions from waste • Transition plans can play an important role in
below 2°C above pre-industrial levels" and pursue "efforts • BASIC+ level inventories are significantly more communicating how companies measure, manage, and
to limit the temperature increase to 1.5°C." comprehensive and cover sources such as scope 3 reduce transition risks. A transition plan should always
• By the end of COP26 - held in November 2021 in Glasgow emissions from transboundary transport and scope 1 allude to the 4 key transition risks - policy and legal,
- 135 countries representing 88% of global emissions and emissions from agriculture, forestry, and land use technology, market, and reputation risk.
90% of global GDP made net-zero commitments • How the net-zero transition will affect firms in the real • Writing a transition plan forces decision makers to rethink
• Within 18 months of its launch, 7,500 entities joined the economy differs across sectors how their business model fits into a decarbonized economy
Race to Zero via one of the member alliances and • For firms in energy-intensive industries whose climate and take appropriate action. Remember that "no decision"
submitted their respective commitments impact is largely driven by Scope 1 emissions, the core is a decision for the status quo.
• The Net-Zero Insurance Alliance (NZIA) is the leading challenge will be to develop alternatives to current • Credibility Gap: Many governments are currently failing to
net-zero initiative for insurers and currently brings together production processes keep pace with their 2030 interim emissions targets, these
20 companies that jointly represent 11% of the world • In other sectors, firms' individual Scope 1 emissions will NDCs often do not outline clear and attainable short-term
premium volume make up a much smaller share of their overall climate targets and milestones.
• Different countries have different degrees of legal footprint. For example, supermarket chains – their own • Less commitment from large companies = Lack of
commitment. E.g., The UK & Germany have embedded emissions are small compared to the emissions arising regulatory pressure + Complexity of understanding what
net-zero targets in law but this is only so for ~10% across the value chain of their products the net-zero implies for business operations
countries • Important tools that can help organizations unpack these
• Around 20% of countries have pledged to reach net zero
Transition Plans complexities are sectoral transition pathways
only via public statements made by key officials • The CDP defines a transition plan as a "time-bound
• There are great differences regarding the scope of action plan that out lines how an organization will pivot its Use of Metrics
activities covered by reduction targets. E.g., the net-zero existing assets, operations, and entire business model • TCFD recommends to disclose metrics used to/for:
target published by Apple explicitly includes Scope 1, 2, toward a trajectory aligned with the latest and most - assess climate risks & opportunities
and 3 emissions, whereas the pledge submitted by ambitious climate science recommendations. - Scopes 1, 2 and 3
ExxonMobil covers only Scopes 1 and 2 • Net-zero transition plans are a relatively new idea, and it is - Targets used to manage climate risks/performance vs
therefore unsurprising that there is currently no detailed, targets
Implications of Net Zero - Actors sec toral guidance on how to develop them. • Typical ESG ratings lack the depth needed to assess
• Following international emission accounting standards, • TCFD: Transition plans should be (a) aligned with overall whether a company is on a net zero by 2050 path
country-level emissions are usually assigned on a corporate strategy, (b) anchored in quantitative metrics and • Portfolio Alignment Tools (PAT) can be used to set
territorial, or production-based accounting method targets, (c) subject to an effective governance process, (d) sector-specific targets by financial institutions
• Critics argue that by placing emphasis on the country full of actionable, specific initiatives, (e) credible, (f) • PAT is guided by 3 Core Qs: Binary Measurement,
where emissions are produced, too little attention is being periodically reviewed and updated, and (g) reported Benchmark Divergence, and Implied Temperature Rise
paid to the consumption pat terns that drive emission- annually to stakeholders. (ITR)
intensive production elsewhere • Reporting Standards: TCFD, SASB, ISSB, EU-CSRD and
GRI

Chapter VIII: Net Zero