What does it mean to reach “net zero?” A recent report by the Carbon Pricing Leadership Coalition (CPLC) explores how the world can decarbonize, and in particular, how carbon pricing can play a role.
To learn more about net-zero, the report, and its findings, we sat down with Chandra Shekhar Sinha, a member of the Task Force on Net Zero Goals and Carbon Pricing and Advisor to the Bank’s Climate Change Group, and Angela Churie Kallhauge, former Head of the Carbon Pricing Leadership Coalition (CPLC) Secretariat.
What does it mean to achieve net-zero emissions?
Technically, global net-zero will be achieved when human-caused greenhouse gas (GHG) emissions have been reduced to the absolute minimum levels feasible, and any remaining “residual emissions” are balanced by an equivalent quantity of permanent anthropogenic removals so that they cannot be released into the atmosphere.
Anthropogenic removals refer to the withdrawal of GHGs from the atmosphere as a result of deliberate human activities, for instance by technological solutions (direct air capture and storage) or through natural solutions (land restoration and improved forest management). Moreover, time is running out: dramatically reducing emissions is not an option, it is an imperative.
Given this challenge, how do you think countries can achieve net-zero?
The CPLC convened a Task Force on Net Zero Goals and Carbon Pricing in November 2020 to answer this very question.
The Task Force found that to ensure net-zero targets are credible and maintain public support, the targets and strategies to achieve them must be transparent, ambitious, and aligned with social and economic development objectives.
They must also apply robust accounting rules so GHG emission reductions are assessed accurately and double counting is avoided, that is not claimed by more than one country or entity)
While all countries, sectors, and companies have a part to play to reduce global emissions, not all countries will achieve net zero at the same time due to differences in capabilities and historic emission levels.
Developing and emerging countries may take longer as they develop their economies and strengthen their institutional capacities
Time is running out: dramatically reducing emissions is not an option, it is an imperative.
How can putting a price on carbon help the world reach net zero by 2050?
Carbon pricing, including international cooperation through carbon markets, can be a really effective tool in the arsenal of measures to mitigate emissions and achieve net-zero targets. But carbon prices must be high enough to provide effective signals to society to reduce fossil fuel consumption and increase efficiency while also ensuring vulnerable people are not disproportionally affected.
For countries, government-imposed carbon pricing policies – in the form of an emissions trading system (ETS) or carbon tax – are economically efficient ways for the society to transition to a low carbon economy, as they incentivize entities subject to the price to find the least expensive emission reductions.
For businesses, carbon credits can provide an avenue to fulfill abatement targets, in addition to pursuing their own science-aligned emission reductions, by compensating for the emissions they cannot immediately mitigate in the short term.
Furthermore, the use of internal carbon pricing can serve as a useful metric for climate risk assessment and investment planning.
How does this all add up to achieving net zero in a way that is socially fair, equitable, and just?
Net-zero strategies must consider the impacts on people, especially low-income and vulnerable communities and Indigenous Peoples. They must align with social-economic and development objectives and promote jobs and fair distribution of costs and benefits.
To achieve the temperature goals of the Paris Agreement, all countries were required to set a national GHG emissions reduction target in their nationally determined contributions (NDCs).
Article 6 of the Paris Agreement provides a framework for governments to implement their NDCs and strengthen climate ambition through voluntary international cooperation.
Under this framework, if properly designed, countries that have already cut their emissions more than the amount they had pledged can sell emissions reductions to others.
The supply and demand for emissions allowances will lead to the establishment of an international market that will raise ambition, stimulate innovation, and catalyze public and private finance. Meanwhile, revenues generated by carbon pricing, under the international carbon markets and the Article 6 mechanism, can be invested in communities, supporting socio-economic development and a just transition.
Besides carbon pricing, what else should countries and the private sector do to achieve net-zero?
The Task Force report identified a number of other actions that can help achieve net-zero, including:
- Significantly reducing emissions to the minimum levels is feasible in line with what is needed to achieve the 1.5-degree target – including aggressive decarbonization driven by fundamental transformations in global energy, urban, industrial, and food systems.
- Balancing any remaining emissions with GHG emission removals through nature-based solutions such as reforestation and/or engineered solutions such as carbon capture and storage.
- Using only high-quality removal credits to balance residual emissions at net-zero and beyond; the use of emission reduction credits must necessarily decrease. High-quality removals refer to removals of GHGs that meet additionality criteria (i.e., they would not have occurred otherwise), and have an accurate baseline, sound carbon accounting method, high durability, and low leakage risks).
- Considering short- and medium-term targets (in addition to 2030 or 2050 targets) to help identify and prioritize specific sectoral and technological transformations and to drive immediate action and investments.
- Addressing value chain emissions known as Scope 3 emissions, which are fundamental for companies to realize credible net-zero commitments.
- Supporting socially fair net-zero strategies and low-carbon transitions across all regions whether implemented by countries or by companies
