Separating Green From Greenwash: Key Questions For Evaluating Net-Zero Commitments: Part 3

This is the third article in a three-part series on understanding decarbonization commitments. This article focuses on climate scenarios. The first article explored how commitments are defined and the second article covered transition plans.

Transition pathways and scenarios

1. What pathways will they follow?

Once a business makes a net zero commitment, it needs to determine the pathway to follow to reach that goal. The transition pathways selected have significant implications for a firm’s strategy. The pathways chosen should cover all material emitting sectors. If sector or region-specific pathways are used, they should be consistent in their assumptions to remain aligned with a global net-zero trajectory. If a firm has significant exposure in a given sector or geography, chosen pathways should have sufficient granularity in those areas to provide decision-useful insights.

Fortunately, a number of credible pathways have been created to help firms reach their net-zero goals. The International Energy Agency, a global leader in energy sector analysis, released a net zero by 2050 pathway last year. The Network for Greening the Financial System (NGFS), an international group of central banks, has collaborated with several highly respected climate research organizations to generate multiple net-zero scenarios. The NZAOA has worked closely with the creators of the One Earth Climate Model to support their members’ target-setting efforts. In addition, the latest IPCC reports include many 1.5 C-aligned scenarios developed by reputable institutions. Firms can also develop their transition pathways, but these should be comparable to commonly used models in their key assumptions.

2. What assumptions does the pathway make?

The climate scenario models that generate transition pathways make a variety of important assumptions about the future. Assumptions particularly critical to climate commitments are energy demand, energy mix, technological development, and negative emissions. While each model makes different assumptions, examining areas of model consensus can reveal much about the attributes of credible pathways.

On energy demand, most 1.5˚ C models foresee significant investments in energy efficiency. Regarding energy mix, nearly all 1.5˚ C models see major reductions in fossil fuel demand, with a particularly sharp decrease in coal consumption. The majority of 1.5˚ C models require rapid growth in renewable power generation, which accounts for well-over half the energy produced in 2050. More recent 1.5˚ C models tend to be conservative in the development and deployment of unproven technologies within their scenarios, instead relying on the scaling up of existing clean technology solutions. Likewise, they are somewhat more conservative in the use of negative emissions technologies, particularly bioenergy with carbon capture and storage (BECCS). The reduced reliance on unproven technologies and large-scale carbon removals reflects criticism by climate scientists and policy analysts of earlier models.

3. How much do the pathways overshoot their temperature target?

When most climate scientists discuss 1.5˚ C of warming, they are referring to the temperature in 2100. Climate models used to generate transition pathways can have temperatures that temporarily exceed 1.5˚ C mid-century, before returning to 1.5˚ C in 2100. This “overshoot” has implications for the transition pathway and by extension the climate commitment. The IPCC defines 1.5˚ C scenarios as no overshoot, low overshoot, or high overshoot. High overshoot scenarios increase potential environmental and social risks due to feedbacks within the climate system that may become more likely at higher levels of warming. High overshoot scenarios are also far less ambitious in the short-term, relying on large amounts of negative emissions later in the 21^st century to offset earlier emissions. As a result, many net-zero initiatives, such as the NZAOA, Net Zero Banking Alliance (NZBA), and Net Zero Insurance Alliance (NZIA) restrict their members to using low or no overshoot scenarios when setting targets.

4. What is the chance of hitting 1.5˚ C?

Not all 1.5˚ C scenarios are created equal. Some of them have significantly higher likelihood of achieving their 1.5˚ C goal. Climate sensitivity is the amount of warming produced from a given increase in atmospheric greenhouse gas concentrations. The factors that influence climate sensitivity can be complex, and since exact climate sensitivity is unknown, modelers assign probabilities that their scenarios will limit warming to 1.5˚ C. The lower the assumed carbon budget (the remaining greenhouse gas emissions that can be emitted), the higher the probability of hitting the 1.5˚ C target. However, smaller carbon budgets require more dramatic cuts in global emissions. The IPCC reported that for a 67% chance to stay below 1.5˚ C of warming, only 400 billion tons of carbon dioxide (or equivalent greenhouse gases) can be added to the atmosphere, representing around 8-11 years of annual global emissions. Transition pathways with higher carbon budgets require less aggressive emissions reductions in the short-term but make it more likely that the scenario will exceed 1.5˚ C. Generally, a pathway must have at least a 50% chance of reaching the 1.5˚ C target to be considered aligned with climate goals.

These twelve questions should not substitute for further diligence in exploring any net-zero commitment. However, they should provide a useful organizing framework to enable stakeholders to evaluate critical aspects of the commitment, the transition plan, and the transition pathways used. The hope is that additional scrutiny and assessment will promote the continued strengthening of net-zero commitments and in doing so, secure a net-zero future.