Climate change: the Net-Zero future of business

5 min

The alarm raised by climate change has finally convinced companies to move toward a greener future. The main goal of companies is to reduce emissions, but what actions are being put in place? Let’s find out together.

How much have emissions affected climate change?

Climate change is the alteration of temperatures and weather events that encompass the entire planet. Undoubtedly, over the billions of years of Earth’s life, the climate has changed countless times. What has been noted, however, is that never has it happened as fast as in the past two centuries.

One of the many triggers is certainly carbon dioxide (CO2) emissions. Carbon dioxide traps in the atmosphere the infrared rays that the Earth re-emits when it is hit by solar radiation, but the beneficial effects of CO2 would not be able to balance its negative effects on our planet’s climate. In short, the Earth traps the sun’s heat, causing the phenomenon of global warming and subsequent climate change.

How emissions arise

One of the biggest sources of emissions is the generation of electricity by fossil fuels. Much of the electricity is generated by burning coal, oil, or gas, which generate CO2 emissions. Industries cause large amounts of harmful emissions in the production of semi-finished materials, such as cement or plastic.

Nowadays, another recurring factor we hear about is undoubtedly transportation. The reason for this is that transportation, powered by fossil fuels, accounts for nearly a quarter of global CO2 emissions. Transitioning to electric is the solution, but it is not easy for heavy vehicles such as ships or planes. Various solutions are being explored there, and at the moment the one that is most highly rated could be Green Hydrogen.

Net-Zero: what it is and why it is important to achieve it as soon as possible

The term Net-Zero refers to the task of reducing greenhouse gas emissions that cause global warming to zero. Net Zero involves acting on the entire value chain process, the set of all processes and activities necessary for companies to create or sell a product or service.

Net-Zero refers to the balance between the number of greenhouse gases produced by human activities and the amount removed from the atmosphere. This means balancing residual emissions, which are considered unavoidable, through equivalent absorption.

Greenhouse gas emissions can also be reduced through natural solutions, such as planting large numbers of trees and consequently reducing deforestation. There are also numerous technologies available, such as direct air capture (DAC), which involves extracting CO2 directly from the air, or bioenergy with carbon capture and storage (BECCS). However, these are technologies that have not yet been tested on a large scale, consequently, they could be expensive and have a significant energy impact.

Paris Agreement on climate change

Reducing emissions from some sectors, such as cement, is quite complicated, mainly because of the costs to be incurred. In fact, it is unlikely that emissions in these sectors can be reduced to zero in time relative to the targets in the Paris Agreement, which presents an action plan to limit global warming.

The Paris Agreement entered into force on November 4, 2016, following fulfillment of the condition of ratification by at least 55 countries representing at least 55% of global greenhouse gas emissions.

In 2018, the Intergovernmental Panel on Climate Change (IPCC) found that to limit global warming to 1.5°C, the Paris Agreement goal was to require global net human-caused carbon dioxide emissions to decrease by about 45% from 2010 levels by 2030, reaching Net-Zero by 2050.

We need to look at Net-Zero not only as a solution to climate change but also as an opportunity to ensure a better future for all Share on X

How can companies cope with the transition to Net-Zero?

To date, there are interesting results in the transition to Net-Zero by companies, although progress is not yet on track. Consequently, the question arises as to what are the key steps to address this change. Here are some key points.

Climate change

1. Implementing new technologies

Technology can undoubtedly be a key element in achieving Net-Zero. Many low-emission manufacturing technologies have already reached the prototype stage, which has demonstrated how these can dramatically reduce emissions. However, development is still very slow. In fact, at this rate, these technologies cannot be deployed before the next decade. Therefore, more projects need to be developed to accelerate the commercial availability of new low-emission technologies.

2. Investment in infrastructure

For new low-emission technologies to be adopted as quickly as possible, major investments in enabling infrastructure will need to be addressed. Much of the industry’s decarbonization processes rely on innovations such as clean hydrogen, carbon capture, and low-emission energy. For the Net-Zero target to be reached by 2050, the capacity of CO2 storage infrastructure needs to be dramatically increased. In fact, investments of about $4 trillion are expected over the next 30 years.

3. Increase demand for low-emission products

Demand for low-emission products has begun to see a slight increase, but the current numbers are not enough. As we saw earlier, the decarbonization of industries may require very large investments, which is why there is a slowdown by companies in the transition. In fact, many companies, in order for them to accelerate the transition to emissions reduction, have joined forces.

Let’s talk about the First Movers Coalition. A global initiative that harnesses the buying power of companies to decarbonize seven industrial sectors, which currently account for 30% of global emissions. In this way, the First Movers Coalition harnesses the collective purchasing power of companies to send a clear demand signal for them to increase emerging technologies that are essential for the transition to Net-Zero.

4. The development of policies that support the reduction of emissions

Through laws and support, a policy can foster the emergence of low-emission markets that are economically viable for all. Well-defined policy frameworks are needed to create a level playing field for companies that are willing to invest in low-emission production. The European Commission, for example, has adopted a package of proposals to make the EU’s climate, energy, land use, transport, and taxation policies suitable for reducing net greenhouse gas emissions by at least 55 % by 2030.

5. Adopt the right mechanisms for capital investment

As we have seen, investing in low-emission activities is not only riskier for companies, but also more expensive. It is therefore necessary to adopt the right mechanisms for companies to work together, allowing for risk sharing while providing direct market pathways. In addition, supportive taxation and public financial support can also be key elements in accelerating the flow of private capital into low-emission industries.

The world is changing fast, and both for companies, but also more simply for any citizen, it is no longer time to be a bystander. The current energy crisis presents a great opportunity to accelerate the pace of industrial decarbonization, which can take us toward Net-Zero. It’s time to act, now or never.

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