Differences between net zero and carbon neutrality

Before explaining the three different net zero terms, it is necessary to understand that the Greenhouse Gas Protocol, divides emissions into three scopes.

• Scope 1: Direct emissions related to on-site fuel combustion or fleet vehicles;
• Scope 2: Indirect emissions related to emission generation of purchased energy, such as heat and electricity;
• Scope 3: Other indirect emissions related to both emissions from upstream and downstream business activities. 

Scope 3 emissions are usually far larger than the two others; however, these emissions are more complicated to measure. When claiming neutrality or having reached net zero emissions, a corporation needs to specify which scopes it is considering to ensure full transparency. When talking about a net zero strategy, all three scopes of emissions need to be addressed.

Furthermore, companies and countries should determine the timeframe of their strategy: are these short-term actions or long-term ones? Some companies claim to be neutral or to have reached net zero, but have not indicated the period: is it neutral for a year? Or since the creation of the company?

Most of the time, commitments from companies and organizations are based on the IPCC report vocabulary.

Let’s start with carbon neutral

Companies that commit to carbon neutrality ensure that emissions produced by their activities (most commonly across Scopes 1 and 2) will be balanced by an equivalent volume of emissions being removed from the atmosphere through an array of market mechanisms, such as carbon offsets.

Carbon neutral goals generally don’t include a level of decarbonization that must be achieved prior to the application of offsets for a company to be verified as carbon neutral (i.e. a 50% reduction by 2030). Indeed, it is possible – though rare – for a company to do little actual reduction of emissions and simply purchase carbon offsets to claim carbon neutrality. Furthermore, there is minimal criteria regarding what types of carbon offsets should be applied.

While some carbon neutrality certification bodies are emerging, there is yet to be a single definition of carbon neutrality or a standardized approach to how to achieve it. A carbon neutrality pledge can be a step in the right direction and is a positive shift for companies looking to progress toward low-carbon or net-zero operations. However, it’s a vague term and is generally not regarded as best practice for addressing the climate crisis.

Net-zero: the North Star for corporate climate action

The official definition of net-zero emissions from the Intergovernmental Panel on Climate Change (IPCC) is the point at which global greenhouse gas emissions added to the atmosphere by anthropogenic  (i.e. human-caused) activities are balanced by anthropogenic removals over a specified period. Net-zero goals are informed by the climate science reported by the IPCC, recommended by leading frameworks like the Science-based Targets Initiative (SBTi), and were the specific call-to-action of the Paris Agreement.

At face value, the definitions of carbon neutral and net-zero sound similar, however, the outcomes for the environment and level of recognized leadership in climate action are quite different. What does the distinction really mean for corporate goal-setting? And why do organizations like the SBTi and COP26 recommend net-zero over carbon neutrality?

In short, corporate net-zero is more robust in both its definition and its guidance about how to decarbonize. Companies that commit to net-zero emissions promise to abate Scope 1, 2, and 3 greenhouse gas emissions to as close to zero as possible, and then (and only then) neutralize any truly unavoidable residual emissions.

Net-zero is meant to be a roadmap to avoiding emissions associated with 1.5°C or greater temperature increase, outlining how quickly companies should decarbonize, what emission scopes should be included, and what market mechanisms are acceptable to address unavoidable emissions.