What is Carbon Neutral?
Carbon neutrality refers to a balance between emitting carbon and absorbing carbon from the atmosphere in carbon sinks. Achieving this state means that the net carbon emissions of an entity—such as an organization, government, or individual—are equal to zero. This balance is typically attained through a combination of reducing carbon emissions and investing in activities that remove carbon from the atmosphere or prevent future carbon emissions.
Pathways to Carbon Neutrality
- Energy Efficiency Initiatives
- Upgrading Infrastructure: Enhancing buildings, transportation, and industrial processes to use less energy for the same output.
- Adopting Energy-efficient Technologies: Utilizing advanced technologies like LED lighting, high-efficiency HVAC systems, and energy-saving appliances.
- Behavioral Changes: Promoting practices such as turning off unused electronics, optimizing heating and cooling settings, and reducing waste.
- Renewable Energy Transitions
- Solar Power: Installing solar panels to generate electricity from the sun.
- Wind Energy: Utilizing wind turbines to convert wind energy into electricity.
- Hydropower: Harnessing energy from flowing water.
- Bioenergy: Using organic materials such as plant and animal waste to produce energy.
- Geothermal Energy: Exploiting heat from within the Earth to generate power.
- Carbon Removal
- Afforestation and Reforestation: Planting new forests and restoring existing ones to absorb CO2.
- Soil Carbon Sequestration: Implementing agricultural practices that increase carbon storage in soils.
- Direct Air Capture: Using technology to capture CO2 directly from the air and store it underground or use it in other applications.
- Biochar: Converting organic waste into biochar, which can be used to improve soil health and sequester carbon.
- Carbon Offsetting
- Purchasing Carbon Credits: Investing in projects that reduce or remove carbon emissions elsewhere, such as renewable energy projects, methane capture, or forest conservation.
- Supporting Emission Reduction Projects: Financing initiatives that prevent future emissions, like clean cookstove programs in developing countries or energy-efficient building projects.
Steps Towards Carbon Neutrality
- Assessing Carbon Footprint: Measuring the total greenhouse gas emissions produced directly and indirectly by an entity.
- Setting Reduction Targets: Establishing clear, science-based goals for reducing emissions.
- Implementing Reduction Strategies: Taking actionable steps to cut emissions through the aforementioned measures.
- Offsetting Remaining Emissions: Investing in offset projects to balance out any unavoidable emissions.
- Monitoring and Reporting: Regularly tracking progress and transparently reporting on emissions and reduction efforts.
Examples of Carbon Neutral Initiatives
- Corporate Programs: Companies like Microsoft and Google have pledged to become carbon neutral by investing in renewable energy and carbon offset projects.
- Government Policies: Countries such as Sweden and New Zealand have committed to achieving carbon neutrality through national policies and international agreements.
- Individual Actions: People can contribute by reducing energy use, supporting green energy, and purchasing carbon offsets for their personal emissions.
Why is carbon neutrality important?
Achieving carbon neutrality is crucial for mitigating climate change and limiting global warming to manageable levels. The increase in atmospheric carbon dioxide, primarily from burning fossil fuels and deforestation, enhances the greenhouse effect, leading to rising global temperatures, sea level rise, and extreme weather events. By aiming for carbon neutrality, entities contribute to a more stable climate, protect ecosystems, and promote sustainable development.
Proponents of carbon neutrality efforts say they can play an important role in mitigating climate change and global warming, which are caused by the build-up of greenhouse gas emissions in the atmosphere. In addition to carbon dioxide, greenhouse gases (GHGs) contributing to climate change include methane, nitrous oxide and hydrofluorocarbons.
These emissions are caused largely by human activities, especially the burning of fossil fuels, and have led to significant increases to global temperatures. The European Union climate monitor Copernicus reported 2023 to be the warmest year on record—nearly 1.48 degrees Celsius (2.66 degrees Fahrenheit) warmer than pre-industrial levels.
Carbon neutrality initiatives can help in achieving the goal of net zero emissions—the reduction of all GHG emissions to near zero, with any remaining emissions removed from the atmosphere. However, net zero emissions initiatives typically focus more on emissions reductions than removal. The Science Based Targets initiative (SBTi), a partnership of several global nonprofit organizations, promotes a corporate net zero standard that calls for companies to reduce direct and indirect value-chain emissions by more than 90%.1 When a business or a country takes climate actions that successfully result in net zero emissions, it’s considered to be climate neutral.
How to establish finance-grade data and best practices for calculating emissions.
Organizations looking to achieve carbon neutrality in their operations and supply chains typically take one or more of the following approaches:
Energy efficiency is the concept of performing of a task using less energy than might otherwise be required. The U.S. Department of Energy refers to energy efficiency as “a vital component in achieving net-zero emissions of carbon dioxide.”2
Energy efficiency improvements can be minor, such as replacing older lightbulbs with new, energy-saving lightbulbs. But improvements can also take the form of larger-scale projects. For example, installing a reflective roof covering and adding insulation throughout a building may keep indoor temperatures lower during hot weather, which would reduce overall energy consumption by HVAC systems. In addition to reducing an entity’s carbon footprint, energy efficiency can lower energy bills, which can help businesses reduce prices for goods and services.
Renewable energy transitions
Renewable energy is energy generated from natural sources that can be replenished faster than the energy is consumed. It is often called clean energy because most types of renewable energy, once in operation, don’t produce carbon dioxide emissions. (The manufacturing and installation of renewable energy technologies do produce a relatively small carbon footprint.)3
Forms of renewable energy include solar power, wind power, hydropower, geothermal energy and bioenergy. As with energy efficiency, organizations can pursue an array of strategies as they embark on transitioning from fossil fuel sources to renewable energy sources. On-site options include installing solar panels, erecting wind turbines and using geothermal heating and cooling systems.
Where available, organizations can also purchase power directly from local renewable energy providers. In the United States and Europe, organizations also have the option of purchasing certificates representing their investment in green energy. (Proponents of such certificates say they help support and raise awareness of renewable energy transitions. Research indicates, however, that the certificates don’t always encourage more renewable energy infrastructure development, raising concerns over greenwashing—the marketing of misleading information about corporate sustainability.)4
Carbon removal and carbon capture
CO2 emissions are naturally removed from the atmosphere through carbon sinks. Natural carbon sinks include forests, oceans and wetlands, which absorb carbon dioxide from the air—a process known as sequestration. Humans can support such biological sequestration through reforestation and preserving or restoring wetlands. (Such habitat restoration can also yield the added benefit of protecting biodiversity.)
Other kinds of carbon sequestration also involve human efforts. These include agricultural practices that increase the amount of carbon stored in soils (known as soil carbon sequestration) and direct air capture (DAC). DAC technology removes carbon dioxide directly from the atmosphere through air capture systems that use chemical reactions to filter out CO2 molecules. Though DAC is a particularly expensive carbon removal method, according to the International Energy Agency (IEA), 27 DAC plants were commissioned worldwide as of July 2023.5 Continued innovation in carbon removal is being supported by government programs such as the Carbon Negative Shot initiative6 and the Carbon Dioxide Removal Launchpad.7
Some technologies used in carbon removal are similar to those used in carbon capture, utilization and storage (CCUS) projects. CCUS projects, however, are distinct because they capture CO2 emissions at the source, such as a factory or power plant. The captured carbon dioxide can then be compressed and transported for industrial uses or stored underground. More than 500 CCUS projects are under development as of July 2023, according to the IEA.8
Carbon offsets and carbon credits
To supplement their sustainability efforts and meet the expectations of climate change-conscious stakeholders, organizations often invest in carbon offset projects and carbon credits. These projects can take the form of many of the efforts described above, such as reforestation and renewable energy generation. By investing in the removal or avoidance of GHG emissions, companies are “offsetting” their own emissions.
In 1997, the Kyoto Protocol became the first international treaty to set legally binding targets for developed countries to cut greenhouse gas emissions. The Paris Agreement of 2015 extended reduction targets to developing nations, ultimately garnering signatories from nearly 200 countries around the world. In 2015, the United Nations also adopted 17 Sustainable Development Goals (SDGs), which included emphasis on lowering emissions.
The focus on carbon neutrality, specifically, has intensified with the development of a global coalition for climate neutrality. By 2020, more than 110 countries committed to achieving carbon neutrality by 2050, including members of the European Union, the United Kingdom, the United States, Japan and South Korea. In addition, China has pledged to reach carbon neutrality before 2060.9
Another global commitment took shape in 2023 at the 28th Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC COP 28). There, more than 120 countries signed a pledge to work together to triple the world’s installed renewable energy generation capacity by 2030 and double the global average annual rate of energy efficiency improvements from roughly 2% to more 4% every year until 2030.10
Technological innovation is central to many organizations’ and countries’ pathways toward carbon neutrality. New developments include a carbon dioxide removal system that leverages sunlight and seawater,11 the advent of small wind power generators and plans to retrofit canals with solar panels.12
In addition, carbon management software can help organizations accelerate their decarbonization efforts. Such software can build a data foundation with GHG emissions information, streamline reporting processes and provide analytical tools that identify opportunities to reach low-carbon goals as well as track performance against commitments.
