Why Net Zero Emission by 2050 is Not a Promising Commitment

Updated: 11 hours ago

Assessing net zero emission through a critical lens

Following the UK's first legally binding commitment to net zero emission by 2050, businesses and countries across the globe have been making bolder and bolder claims about their objectives and ambitions in achieving net zero by 2050, or even 2030.

According to a report published by the Data-Driven EnviroLab and the NewClimate Institute, the number of commitments from governments and businesses to reach net zero emission by 2050 have doubled in less than a year, reaching a total of 22 regions, 452 cities, 1,101 businesses, 549 universities and 45 of the biggest investors. Why has this trend accelerated in 2020? I think it is reasonable to infer that lessons learnt from the COVID-19 crisis and increasing pressure from external stakeholders are the major reasons that pushed businesses and governments to adjust their strategies and objectives to place themselves in a more flexible position.

But how realistic are these goals?

I do not intend to approach the future of sustainable development and transition towards a green economy with pessimism, but if we examine historical trends, accountability issues and other challenges of net zero emission from more critical perspectives, I would argue that the current effort is not very promising.

1. Lack of standardization as an opportunity for ‘greenwashing’

what do we really mean by net zero?

I do agree that, depending on different products, stages of development, and other differences between companies or countries, the precise definition of net zero could vary. It is therefore reasonable for us to take them as flexible targets. Nevertheless, this provides an opportunity for companies to take such an advantage to advertise themselves as net zero emission pledgers with an ambiguous carbon emission reduction goal that is not up to standard. The most likely question to arise from this is: what is the standard? Indeed— this is where the problem lies. There is no exact standard or definition for net zero; instead, each entity has their version of net zero emission.

Ranging from Microsoft’s “Carbon Negative by 2030” to Unilever’s “Carbon Positive by 2050,” we have to appreciate the effort from large corporations in leading such global revolution. However, the huge variety of claims and definitions could be confusing for the general public, as well as regulators, who may encounter difficulties in properly assessing their viability.

PwC’s definition of a commitment to net zero by 2030 means to reduce their total greenhouse gas emissions by 50% in absolute terms by 2030, including a switch to 100% renewable electricity in all territories.

As for BP, one of the world's most renowned oil companies,, net zero by 2050 means tackling around 415 million tonnes of emissions in order to cut the carbon intensity of the products they sell by 50% by 2050.





Despite large variations in targets, the aforementioned ones are more specific and clear, whereas most of the other targets are merely claims with ambiguous wording.


For instance, when HSBC informed their clients that they would reduce “financed emissions from our portfolio of customers” in line with the goals of the Paris Agreement on climate change, the corporation used the word “ambition” or “ambitious” no fewer than five times. However, besides these bold words, HSBC did not provide a firm timeline for reducing its financing of coal, oil and gas projects before 2050.


This is not an extreme case, but a reflection of general practices in all industries. Various surveys have disclosed different perspectives of this issue: companies that claim to reach net zero either have no clear target, or no science-based target, or unrealistic targets.

A survey by PwC reported that only 29% of UK lenders had “a science-based or net-zero climate target.”
Meanwhile, a poll of 120 senior executives conducted by South Pole (a sustainability consultancy) reported that only 48% of those with a net zero target had set milestones to achieve it, where only 11% of them had set science-based targets (SBTs)......

When examining Shell’s campaign to achieve net-zero by 2070, we can clearly see that it is unlikely to be unrealistic. In Shell’s scenario, in order to reduce carbon emission, it needs to rely heavily on the combination of carbon capture and storage (CCS) and bioenergy (BECCS). Shell has estimated that there would need to be 10,000 large CCS facilities in operation by 2070; however, looking at where we are today using data from Statista, the number of operational CSS facilities worldwide is only 19.


“Unless these targets are supported by strategies that are reasonable, transparent and include strong accountability mechanisms, there is a significant risk that stakeholders will be misled,”
- ClientEarth lawyer Daniel Wiseman.

2. Accountability and long time span: underlying uncertainties in net zero targets

Although there are companies such as Microsoft that have committed to net zero by 2030, most of the companies and governments are aiming at 2050, which is a target set for a far-off date. Under today’s fast changing economy and societal norms, how likely are the committed likely to stick to the target? The problem doesn’t only exist at the enterprise level, but also at a broader macroeconomic level.

A rapidly changing political landscape imposes significant challenges to achieving long-term targets. The US is a rather extreme case, but given its influential role in the world’s economy, changes in its policies can make global impact. Donald Trump withdrew the US from the Paris agreement in November, and now, Joe Biden is expected to have the US rejoin it in the first few days of office. Dynamics in policy decisions will only make the future more uncertain, as without clear intermediate targets, there will always be a question of whether or not the next source of authority will uphold previous commitments.

Coming back to a micro level, the main problem that arises from a long time span and lack of intermediate goals is transparency and accountability. By recognizing the risk of change in the political landscape, it is easy to see how the accountability problem is more severe in a business context. Structural transformation and change in businesses’ management teams could be more radical, and it is hard to assume which direction the companies would follow in their future developments.

In the same study conducted by NewClimate Institute and Data-Driven EnviroLab, “only 8 percent of companies’ net-zero targets include interim targets to chart a decarbonization pathway.”

Without such intermediate targets, the underlying uncertainties behind these net zero commitments are detrimental to ensuring that the final targets can be achieved.



3. The problems lies in the critical industries: challenges to the heavy industry

One industry that stands at the heart of the problem is the heavy industry. The heavy industry is arguably both a challenge and an opportunity for net zero. Chemicals, steel, and cement are all considered as materials produced by the heavy industry, and the demand for these materials come from our daily lives. In contrast to demand for products sold in consumer retail such as clothing— which can be reduced by encouraging second-hand trading, recycling, or product innovation— it is very difficult for us to reduce our demand for these materials. The IEA reported that “since the millennium, global demand for cement and steel has more than doubled, and the production of plastics – a key group of chemical sector products – has increased by more than 90%. As economies around the world continue to develop, so will the production and use of these materials.” An interesting point to note is that materials made in the heavy industry are also key to construction of sustainable energy infrastructures, such as wind turbines, electric vehicles and solar panels, which will further escalate the demand for these materials in the future.

The bad news is, producing these materials requires vast quantities of energy, which reached a staggering 2300 Mtoe in 2019, roughly equivalent to the total primary energy demand of the United States.


To sustain chemical reactions in the steel and iron production process, a huge amount of fuel needs to be supplied to generate heat, including fossil fuels of 1900 Mtoe, electricity of 250 Mtoe, and comparatively smaller amounts of bioenergy.

In addition to common factors, the IEA presented a few unique challenges that the heavy industry faces in addressing net zero emissions:

  1. Capital assets in heavy industry such as industrial plants have a long lifetime, and attempts to switch to alternative technologies incur large costs.

  2. Production processes in heavy industry require high temperatures for chemical reactions, which are generated using non-renewable resources. The availability of sustainable biomass puts a limit on its use as a substitute.

  3. Several emissions in the production process are inevitable; for example, the CO2 that results from the calcination reaction that is necessary to produce clinker, the active ingredient in cement. Revolutionary change in the production process needs technological advancement and research breakthroughs, which in the present is very difficult.

  4. Thin profit margins and the high level of competition in the heavy industry makes the adoption of innovative methods extremely unattractive for industrial leaders. They do not have an incentive to sacrifice cost advantage and take undercuts on price. The large upfront investments that are likely to be required for shifting towards near-zero emission technologies is a major challenge facing sustainable transitions of the heavy industry.

Concluding remarks

Despite all the challenges that I have mentioned above, there are still many large corporations such as Starbucks, Microsoft, and Amazon that are making positive and realistic impacts on climate change and sustainability issues with transparent and clear intermediate targets. Arguing that global movement towards net zero is just “hype” resulting from COVID-19 is not without evidence, but is still unconvincing. The trend is likely to become a long-lasting paradigm shift for the global economy as a whole—I would argue that the current challenges facing net-zero emission can be gradually resolved as businesses build up their intermediation strategies and adapt their business models to emerging “new normal.”

As for now, it is important for us to be aware of the possible deviations of net zero claims from reality, as assessing a corporation's net zero targets through a critical lens is critical in order for investors to make better investment decisions.




references:

  1. “Environmental, Social, And Governance: Too Late For Net-Zero Emissions By 2050? The Potential Of Forests And Soils.” Environmental, Social, And Governance: Too Late For Net-Zero Emissions By 2050? The Potential Of Forests And Soils | S&P Global Ratings, www.spglobal.com/ratings/en/research/articles/200604-environmental-social-and-governance-too-late-for-net-zero-emissions-by-2050-the-potential-of-forests-and-s-11500248?utm_campaign=corporatepro&utm_medium=contentdigest&utm_source=pathnetzero.

  2. “Greenwashing 2.0? Defining What It Means to Be a 'Net-Zero' Business.” Edie.net, www.edie.net/library/Net-zero-and-carbon-negative-business-commitments/6960.

  3. Iea. “The Challenge of Reaching Zero Emissions in Heavy Industry – Analysis.” IEA, www.iea.org/articles/the-challenge-of-reaching-zero-emissions-in-heavy-industry.

  4. “Our Aims: Who We Are: Home.” Bp Global, www.bp.com/en/global/corporate/who-we-are/our-ambition/our-aims.html.

  5. PricewaterhouseCoopers. “Committing to Net Zero by 2030.” PwC, www.pwc.com/gx/en/about/net-zero.html.

  6. statistics. “Topic: Carbon Capture and Storage.” Statista, www.statista.com/topics/4101/carbon-capture-and-storage/.

  7. Unfccc.int, unfccc.int/news/commitments-to-net-zero-double-in-less-than-a-year.


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