Net Zero, For Real

By Ladislas Smia, Head of Sustainability Research, Mirova.

The International Energy Agency (IEA) published its “Net Zero” report, detailing the measures which will need to be put in place if carbon neutrality is to be achieved by 2050. This is the first time that the IEA has explicitly described the concrete actions which will need to be implemented by each major energy-related sector in order to limit the rise in temperatures to 1.5°C.

The list of measures is dizzying. As of this year, investments in new oil and gas fields and coal mines must stop. As of 2025, the sale of gas boilers for buildings must end. By 2030, all coal-fired power plants must be closed in advanced economies; 60% of car sales worldwide should be electric cars; air traffic must be pegged at 2019 levels. By 2040, 50% of buildings must be renovated to be carbon neutral; electricity generation should be completely decarbonized, with solar and wind accounting for the majority of production; 50% of aircraft must operate on low-carbon fuels. By 2050, more than 85% of buildings will be low-carbon. Between 2020 and 2050, hydrogen production must be multiplied fivefold and should be gradually decarbonized to 100% green hydrogen.

The report also reminds us that, even with the roll-out of all these measures, there will still be CO2 emissions that we will need to capture and sequester. This involves so-called CCS technologies on plant chimneys, but also in the end of deforestation and in fact an increase in forest cover.

The radicality of the required transformations contrasts with the low level of ambition of the “carbon neutrality” announcements of many companies. To date, most commitments are limited to reducing greenhouse gas emissions over a very narrow scope, rarely taking into account supplier emissions or product use. These approaches also often involve purchases of green electricity or financing of tree plantations. This is certainly a first step. But it is now very clear that these actions are far, far from the level of ambition required.

No oil company to date has committed to stop investing in new oil or gas fields. Very few automotive manufacturers have a target of 60% electric car sales in less than 10 years. Air transport players: aircraft manufacturers, airport manufacturers and airlines all predict an increase in air traffic in the coming years. Can we then seriously talk about carbon neutrality?
With this new report, it now seems very clear that economic actors wishing to make commitments on carbon neutrality must align their economic model with the path presented by the IEA.

For financial players, this list of measures also has very strong implications. This report affirms once again that investors must very quickly reduce the financing of fossil fuels and invest heavily in solutions to climate change such as renewable energy, energy efficiency, low-carbon mobility or hydrogen. It is clear then that talking about alignment with a 1.5°C world requires a radical shift in capital allocation, which is still far from being the case for the overwhelming majority of the sector.

The publication of this report can be interpreted as a pledge to stop low ambition carbon neutrality communications. We no longer have time for reduction commitments supposedly aligned with science while the concerned parties forget the essentials, leaving aside the impact of the products they market. And while we will need to replant forests to combat climate change, we can no longer be content with compensation approaches that do not challenge the business model.

If we still want a chance to avoid the most serious consequences of climate change, now is time to focus on the profound transformation of our societies.