Defining
Net-Zero
Alignment to the UN Paris Agreement
In 2015, the United Nations (UN) Paris Agreement under the UN Framework Convention on Climate Change (UNFCC) was adopted by 196 countries with the goal to limit global warming. Based on extensive scientific research, the binding treaty aims to have global temperatures remain below 2°C; preferably 1.5°C compared to pre-industrial levels. The Intergovernmental Panel on Climate Change (IPCC (2018)) in its special report supported that in a transition to net zero emissions, limiting global warming to 1.5°C compared to pre-industrial levels by mid-century will lower the risks associated with climate change. Responding to a request from the UNFCCC to compare the impacts of 1.5°C rise with a 2°C one, the IPCC’s (2018) special report recommended a focus on a target of 1.5°C by mid-century.
To ensure a cohesive and measurable plan is established, each country submitted its plan of action known as Nationally Determined Contributions. These plans include how each country aims to reduce its greenhouse gas emissions in addition to embedding methods of how to build resilience to adapt to the increase of rising temperatures.
The Paris Agreement endorses that emission reductions should be in absolute terms, which means that targeting an intensity value such as CO2 emission per unit or measure would not be accepted. This position supposes that organizations wanting to reduce their CO2 emissions should rethink the way they run their businesses. The Agreement also specified that adaptation and mitigation should be balanced with respect to financing climate change-related strategies. The UN Environment Program (UNEP (2016)) recommended a target year of 2045 to 2055 for net zero carbon emissions. For net zero greenhouse gases, the target year is 2060 to 2080, which means the process to remove non-CO2 emission gases needs more time than CO2 emissions removal.
The Paris Agreement provides a framework on how to address the financial, technical and capacity building requirements to achieve the Agreement’s stated objectives.
Financial
Under this scope, the Paris Agreement guides more developed countries to provide financial assistance to less developed and more vulnerable communities. Large scale investments are a requirement to mitigate and adapt to the adverse impacts of climate change. If countries are not supporting each other, it would remain extremely difficult to achieve the 1.5°C objective. During COP26, the Paris Agreement coalition established a financial mechanism to provide funds to developing countries. The Green Climate Fund (GCF) was designated to handle the eligibility of each country and in which area to prioritize funds. Examples of financial mechanisms that could be implemented at a local level include:
National Climate Funds
National Carbon Markets
Non-concessional and Concessional Loans
Concessional loans can move beyond a one-one ratio where the loan is based on whether or not the project achieved specific climate-related objectives.
Grants
Insurance Instruments
Green Bonds
Financing the transition towards net zero is currently going through a transformation process as capital allocation, investments, and the current economic models need to be adjusted to allow for a comprehensive transition of entire financing systems. Focus on environmental, social, and governance (ESG) indicators is now of material importance for money market funds with a particular focus on risks and opportunities related to climate change.
Technical
To accelerate and scale up action towards addressing climate change, advanced technologies must be used to achieve global objectives. The purpose of the technical methodology is to provide guidance on technological mechanisms that should be used to enhance and promote the Paris Agreement’s development and progression. It consists of the Technology Executive Committee (TEC) and the Climate Technology Center and Network (CTCN).
The key themes identified under the guidelines include:
Innovation
Implementation
Enabling environment and capacity building
Collaboration and stakeholder engagement
Support innovative developments and the introduction of more efficient technologies taking place across the various sectors
Capacity Building
Similarly to the direction taken for technology guidelines, capacity building aims to encourage more developed countries to continue supporting developing countries by not only sharing knowledge but communicating advancements and progress in achieving targets. This area emphasizes the importance of public awareness, education, and training on climate change.
Under this theme, a subtopic was launched called Capacity Building Initiative for Transparency (CBIT). This program aims to address the reporting and disclosure of countries’ Nationally Determined Contributions.
The main points under this initiative includes:
- National Institutions
- Tools and Training
- Transparency over time
Capacity building undoubtedly plays a pivotal role in transitioning towards Net-Zero. Alongside technology and finance, it is perhaps the most important component to pivot, mindset change, and embark on the proper and sustainable adoption of new processes around the world. In the MENA region, the climate crisis poses significant threats and when coupled with a huge youth bulge, high rates of unemployment and minimal systemic change, the need for capacity building should be considered a top priority.
Net-Zero
Due to the high uptake of the Paris Agreement, there has been increased efforts made by 196 countries working towards a low-carbon economy. As a result, more institutions have committed to become Net-Zero or carbon neutral by a specified year. This trend has accelerated innovative and the development of competitive zero carbon solutions.
The UN’s Net-Zero coalition defines and identifies the importance of committing to this baseline, providing the following definition:
What is Net-Zero?
Cutting greenhouse gas emissions to as close to zero as possible, with remaining emissions re-absorbed from the atmosphere into oceans and forests. It is when all greenhouse gases being emitted are equivalent to all greenhouse gases being removed from the atmosphere.
Companies that commit to Net-Zero must firstly consider that emissions refer to all greenhouse gases including CO2, methane (CH4) and nitrous oxide (N2O). Carbon-neutral is similar to Net-Zero, however only includes CO2 emissions. Achieving Net-Zero requires offset activities to account for the greenhouse gases emitted by the company’s activities.
Why is Net-Zero important?
Studies have shown that to have an inhabitable planet, global temperatures need to remain limited to 1.5°C above pre-industrial levels, where we have now reached 1.1°C above those levels. To reach the 1.5°C target, emissions need to be reduced by 45% by 2030 and become Net-Zero by 2050.