Helping companies develop their Net Zero strategies comes with a series of challenges which we at Net-Zero-Solutions can assist you with.
Firstly, the term poses a problematic starting point for companies. It emanates from the Paris agreement Article 4.1 referring to a planetary state where the Parties aim to “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of the century” (1).
Using the term ‘net zero’ to then apply to companies’ support for Paris, needs to remain true to this intent but be recast as an aspiration that companies can strive for. Is this possible?
Yes, we believe it is, but sadly there are pitfalls which are causing division and challenge (see The net-zero backlash has arrived | Greenbiz ) just at a time when we need solidarity, action and pace.
The primary challenge is that net zero for companies is not set out in policy or has a standardised definition. There have been impressive efforts to do this, for example by the Science Based Target Initiative (SBTi) www.sciencebasedtargets.org but not all companies follow this guidance or indeed, agree with it.
So, what then do companies do who want to genuinely do the right thing but avoid inadvertently receiving a backlash of criticism?
Firstly, understand your emissions profile, what is your baseline and where are you heading. Then understand what your profile needs to be to be aligned with climate science. Ideally you should be aiming to align to a 1.5°C pathway. Whilst different industry sectors have different 1.5° decarbonising pathways (if you are following SBTi), a rule of thumb for all sectors is to aim to reduce emissions by approximately half by 2030 and achieve net zero by 2050.
Working out how you do this is the next challenge. It will take a deep understanding of the sources of emission in your business, what you can do to reduce them and what new business models you can adopt. For many companies, this is business transformation and should be tackled as such. Of course, you will not have all the answers about future technology developments and carbon price trends, especially with regards to the longer time horizon to 2050. Therefore, having access to experts who can help you make the best educated business judgment will be a key success factor.
Once a company has determined its net zero pathway, it must commit to short and medium term targets to ensure stakeholders can hold them to account.
Putting this multidimensional puzzle together is complex as it requires input from across the business. It also needs to result in an attractive investor proposition. While it appears, consumers are reluctant to pay a premium for green, so too are investors cautious about the short term impact of this business transformation on their holdings, albeit the business is future-proofing itself.
At Net-Zero-Solutions we can help companies navigate this change, project manage your transformation and provide the deep expertise on decarbonising pathways such as biofuels, solar and wind.
Article 4.1. In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.
Choosing feedstocks for the production of #RenewableFuels has been a minefield for unwary investors since the early days of the sector. After a short-lived honeymoon with the environmental lobby in the early half of the 00's, the challenges started coming thick and fast - Food vs Fuel or Indirect Land Use Change to name a few. New crops like jatropha have been presented as "miracle crops", before falling into relative anonymity in recent years. Palm oil, despite being an excellent feedstock quality-wise for #RenewableDiesel and #SAF production, has come under enormous criticism by being linked to deforestation of South-Asia native rainforests.
More recently, environmental NGOs have orchestrated a deliberate campaign challenging the use of forestry biomass for bio-energy production. For producers, technology developers, and the finance providers keen to invest in them, understanding the sustainability aspects of the feedstock they rely on - and crucially, how these are treated within biofuels regulations across the world - is as important as understanding the economics of feedstock sourcing and supply.
Furthermore, the carbon intensity of these feedstocks, which is fundamental to the carbon abatement realised, plays a critical role in both the value created in specific jurisdictions, as well as to the cost of the feedstock. No wonder, therefore, that those investors are very wary of making the wrong choice. Picking the right feedstock for the right technology, products and place will continue to be the key to unlock the high returns that this sector is capable of.
Net Zero Solution has extensive expertise in biofuels and renewable fuels regulations across Europe and North America, of the wide array of renewable fuels production pathways, and of the impact of feedstock choices on regulatory incentives and the economics of projects.