The task we face is huge - getting the transition right is going to be critical

The questions that we urgently need to answer are:

  • what milestones and binding commitments can help us protect the integrity of net zero (lest we end up leaving it too late to make the required changes)?
  • how accurate is our measurement of emissions and emission reduction?
  • what is the incentive for companies to commit to net zero?
  • do they have meaningful transition plans in place to support their commitments?
  • do we have credible certification regimes and markets for trading in carbon drawdown?
  • do investors accurately value carbon reduction and drawdown and will they deploy their money accordingly?
  • what kind of policy environment is required to accelerate the transition?
  • how can governments be persuaded to encourage / mandate emission reduction and investment in net-negative technologies?

Key considerations as we move towards net zero

IssueMajor concernsPossible solution areas
Integrity of net zero
  • To achieve net zero by 2050, we need massive change - starting today
  • Targets and milestones explicitly linked to net zero
Accuracy of measurement
  • Without accurate measurement we cannot chart progress and assess drawdown
  • Double counting of both emissions - one company's scope 3 emissions are another company's scope 1 emissions - and offsets
  • The IPCC distinguishes between 3 increasingly sophisticated and data-intensive tiers of measurement / reporting
  • Satellites can now measure emissions of certain gases from power facilities etc.
Incentives for net zero
  • Even those governments that have committed to net zero are not requiring companies to follow suit
  • Few investors are requiring net zero commitments, fewer still are following up on transition plans
  • Investors and lenders are struggling to assess the degrees of warming / emissions elves of their portfolios>/li>
  • Most of the companies that are commuting to net zero are in low (in-house) emissions sectors such as financial services
  • Stronger links required between company and country emissions
  • Development of effective methodology to assess portfolio degrees warming
Adequacy of transition plans
  • Most governments and companies that have committed to net zero do not have credible plans with clear milestones for getting there
  • Even easy first steps - such as switching to renewable power - are delayed
  • There is insufficient data / information and no good benchmark against which investors can assess transition plans
  • Mandatory carbon reporting
  • Link executive compensation to achievement of carbon targets
  • Promote awareness amongst investors
Off-the shelf solutions
  • We need more "plug and play" first steps, such as switching to renewable energy
  • Several of the international organisations promoting carbon reduction are insufficiently stringent in their requirements
  • Definition of "best in class" would be helpful for investors to assess companies' progress
Effective certification regimes
  • Certification of carbon offsets is notoriously unreliable
  • Inadequate attention paid to duration of carbon storage
  • Greater deployment of blockchain technologies
  • As carbon sequestration becomes more common, understanding grows of hazards and opportunities
Valuation of carbon drawdown
  • Unless carbon saving / drawdown is properly valued by markets (or mandated by regulation) it is very hard to achieve
  • Carbon taxation or payments for carbon avoidance
Policy environment
  • Governments' commitments tend to be quite fickle / inadequate
  • Politicians do not feel empowered by their constituents to act radically
  • Regulation (for example mandated diminishing carbon content for fuels) may be more effective than market mechanisms, but also harder to enact
  • Covid may set back willingness to forge ahead on climate
  • Countries may seize the opportunity for a green re-set and / or imposing environmental conditions on emergency lending
  • Placing an absolute limit on the percentage of emissions that can be covered by offsets could be helpful
Public - private collaboration
  • There can be both "chicken and egg" and signalling problems around building out low carbon infrastructure
  • Government procurement is a powerful tool for catalysing new markets and moving to scale
Limits to corporate capabilities
  • Investors may want corporates to take responsibility for emissions they cannot fully control
  • Clearer delineation of responsibility for different emissions

In the absence of an appropriate policy context, and an effective data and verification regime, negative emissions technologies are unlikely to be deployed at the necessary pace and scale