GARP SCR Ch8: Net Zero

What are IPCC's estimates for emission reductions in order to have a chance of limiting global average temperature increases to 1.5c?

IPCC estimates that global emissions need to halve by 2030 from 2019 levels and reach net zero by 2050

Note: In most recent IPCC 2022 report, IPCC estimates that to limit global warming to 1.5c, global net emissions would need to peak before 2025, decline by 43% by the 2030s, and reach net zero in the early 2050s

UN Race to Zero campaign

- Launched in run-up to COP26

- Intention: To mobilize "real economy" a ctors, incl. regions, cities, businesses and financial institutions, to commit to reducing carbon emissions to net zero by 2050

- Operates as a coordinating umbrella framework of partner initiatives, which usually have either a sectoral focus or represent coalitions of particular types of entities

Frankhauser et al. (2022)'s 7 attributes that net-zero targets need to fulfill to provide a meaningful framework for action

1. Front-loaded emission reductions

2. Comprehensive approach to emission reductions

3. Cautious use of carbon dioxide removal

4. Effective regulation of carbon offsets

5. Equitable transition to net zero

6. Alignment with broader socio-ecological objectives

7. Pursuit of economic opportunities

Country-level emissions are usually assign on a ___ accounting method

Territorial or production-based accounting method - a country's emissions are those which directly arise within its geographical boundaries

Consumption-based accounting methods

Measures the cumulative emissions that arise from the production of all goods and services consumed in that country

Emissions accounting standards ; high-income countries vs low and middle-income states

High-income countries have much higher consumption-based than production-based emissions; low- and middle- income states have domestic emissions-intensive industries that cater predominantly to foreign demand

Protocol for Community-Scale Greenhouse Gas Emissions Inventories

- Published by GHG Protocol; best-practice standard for sub-national GHG reporting

- Two diff GHG reporting standards for cities and regions:

1. BASIC: Cover scope 1 and 2 from stationary energy and transport, scope 1 and 3 from waste

2. BASIC+: incl. scope 3 from transboundary transport, scope 1 from agri, forestry and land use

How does the Protocol for Community-Scale Greenhouse Gas Emissions Inventories define scope 1?

Scope 1: GHG emissions from sources located within the city boundary (equiv. to territorial emissions)

How does the Protocol for Community-Scale Greenhouse Gas Emissions Inventories define scope 2?

Scope 2: GHG emissions that occur as a consequence of the use of grid-supplied electricity, heat, steam and/or cooling within the city boundary

How does the Protocol for Community-Scale Greenhouse Gas Emissions Inventories define scope 3:

Scope 3: All other GHG emissions that occur outside the city boundary as a result activities taking place within the city boundary

What are thee SBTi's three different approaches outlined that financial firms can take to set a science-based target?

1. Sectoral decarbonization approach (define emissions-based physical intensity targets for investments and loans)

2. SBTi portfolio coverage approach

3. The temperature rating approach

What are the challenges of carbon offsetting?

1. Leakage = displacing rather than avoiding emissions

2. Permanence = long-term storage of carbon

3. Accurate measure of amounts of carbon stored

What are the 4 high-level principles regarding offsets set by the Oxford Principles for Net Zero Aligned Carbon Offsetting (2020)?

1. Cut emissions, use high-quality offsets, and regularly revise offsetting strategy as best practice evolves

2. Shift to carbon removal offsetting

3. Shift to long-lived carbon storage

4. Support the development of net zero-aligned offsetting

SBTi and carbon offsetting

- SBTi only validates targets that exclusively rely on credits to neutralize emissions or to finance additional climate mitigation beyond the entities' reduction targets

- SBTi only recognizes carbon credits from carbon removal projects; does not allow for the use of credits generated through emissions avoidance

Credibility Gap

Many governments' Nationally Determined Contributions (NDCs) do not outline clear and attainable short-term targets and milestones

What are the three broader topics that TCFD recommends disclosing climate-related metrics to cover?

1. Disclose metrics used to assess climate-related R&Os in line with the strategy and risk management process

2. Disclose scopes 1 and 2 and, if appropriate, scope 3 emissions and related risks

3. Describe the targets used to manage climate-related R&Os and performance against targets

What are the two usage of carbon-related metrics beyond reporting?

1. Project selection purposes: Decisions can be made based on metric thresholds or relative to rivalling projects

2. Internal carbon pricing: To account for emissions in net present value (NPV) calculations, which punishes carbon-intensive projectsn

In March 2022, the US Securities and Exchange Commission (SEC) published a proposal to ____

- Make climate-related reporting mandatory for its registrants, largely built on the TCFD's recs

In 2023, the TCFD handed over responsibilities for the continued monitoring of progress on climate-related disclosures to ___ and disbanded

IFRS' International Sustainability Standards Board (ISSB)

The Corporate Sustainability Reporting Directive (CSRD) was finalized in 2023 and listed organizations to ________

Disclose their sustainability R&Os related to social issues

Double materiality

- Coined by the EU in 2019

- In addition to reporting on all activities and R&Os which could be material to the company's values, turnover, income, or other KPIs, companies must also disclose activities which could be material to society and the environment

Note: ISSB has excluded DM from the scope of its reqs

Shadow carbon price

An est. cost of carbon used for project selection purposes

4 broad categories of alignment metrics published by GFANZ in 2022

1. Binary target measurement

2. Maturity scale alignment metrics

3. Benchmark divergence

4. Implied temperature rise (ITR)

Binary target measurement

- Provides insights on the % of portfolio companies with science-validated 1.5 degrees-aligned reduction targets

- Pros: Simplest to use, based on easily attainable data, broadly applicable to any asset class

- Cons: Offers no insight into the degree of net-zero alignment/misalignment, difficult to aggregate results to portfolio level

Maturity scale alignment metrics

- Groups portfolio companies into alignment categories

- Pros: Holistic understanding of the trajectory that portfolio companies are on

- Cons: No commonly used approach for categorizing companies → difficult to compare across entities or assess the robustness of indiv. assessments

Benchmark divergence

- Evaluates the distance from a net-zero aligned pathway

- Pros: Allows eval. of progress toward net zero, and allows for results to be aggregated meaningfully to the portfolio level

- Cons: Complex and requires climate scenario expertise, based on difficult-to-obtain data, challenging-to-interpret technical output

Implied temperature rise (ITR)

- Translates the distance from a measured pathway into a projection of likely end-of-century global warming outcomes

- Pros: Above added advantages

- Cons: Complex, requires climate scenario expertise, based on difficult-to-obtain data and/or extensive assumptions

Which of the following was a key finding of the 2018 IPCC Special Report on 1.5°C?

A.The difference in the global impacts on human societies and the natural world are not likely to be starkly different between a 1.5°C and a 2°C warming scenario.

B.Under a 2°C scenario, the share of global population exposed to severe heat is likely to be significantly higher than under a 1.5°C scenario.

C.The estimated share of species that would lose over half their habitat range and face a significant risk of extinction would likely be the same under a 2°C and a 1.5°C warming scenario.

D.The probability of extreme drought and water stress is likely to be lower under a 2°C scenario, compared with a scenario where the world manages to limit global average temperature increases to 1.5°C.

B. Under a 2°C scenario, the share of global population exposed to severe heat is likely to be significantly higher than under a 1.5°C scenario.

In national net-zero pledges, countries largely commit to which of the following:

A.Reducing all emissions generated via the production of goods and services consumed in their territory.

B.Reducing all emissions that are directly produced within their territory.

C.Balancing all emissions that are directly produced within their territory with GHG removal via sinks.

D.Balancing all emissions generated via the production of goods and services consumed in their territory with GHG removal via sinks.

C. Balancing all emissions that are directly produced within their territory with GHG removal via sinks.

Which of these approaches are currently outlined by the Science-Based Targets initiative as science-based ways for financial institutions to develop a decarbonization target?

A.Setting a pledge to reduce only Scopes 1 and 2 emissions, such as direct operational emissions and those arising from electricity, energy use, heating and cooling.

B.Defining targets to reduce the physical intensity of investments and loans in a set of emissions-intensive sectors.

C.Increasing investments in companies operating in "green" sectors, such as renewable energy, hydrogen production, and electric vehicles.

D.Divesting from emissions-intensive industries.

B. Defining targets to reduce the physical intensity of investments and loans in a set of emissions-intensive sectors.

Which of the following correctly describes GHG accounting methods?

A.Consumption-based accounting means that a country's emissions are those which directly arise within its geographic boundaries.

B.Production-based accounting has become the internationally dominant standard for attributing emissions at the country level.

C.Consumption-based accounting's drawback is that it has placed a disproportionate share of the transition burden on developing countries.

D.Production-based accounting measures the cumulative emissions that arise from the production of all goods consumed in a country, regardless of where this production took place.

B. Production-based accounting has become the internationally dominant standard for attributing emissions at the country level.

Which of the following financing activities poses the greatest threat to stabilizing or preventing further emissions?

A.Making operations more efficient.

B.Decommissioning high carbon assets.

C.New exploration and production.

D.Sourcing raw materials from local suppliers.

C. New exploration and production.

Which carbon credit project relates to displacing rather than avoiding emissions?

A.Carbon storage measurement

B.Removal projects

C.Permeance

D.Leakage

D. Leakage

Which participating alliance in the UN Race to Zero is specific to governments?

A.Under 2°C Coalition

B.Planet Mark

C.The Exchange Group

D.Pledge to Net Zero

A. Under 2°C Coalition

Which capital deployment metric can be used by financial institutions to analyze whether investments are sustainable?

A.Investment in climate adaptation measures

B.Financed emissions by asset class

C.Percent of revenue from coal mining

D.Revenue associated with water withdrawn

A. Investment in climate adaptation measures

Which organization is a key disclosure and impact reporting standard setter, focused on how companies can report external impacts on issues such as climate change, human rights, and corruption?

A.Business Declares

B.SBTi

C.GRI

D.SASB

C. GRI