The UN, the European Union and the IPCC all agree on one thing: We must become carbon neutral by 2050. This means balancing carbon dioxide emissions with the amount of carbon absorbed from the atmosphere. The relationship between greenhouse gas emissions and global warming has been scientifically proven. We therefore must reduce them, achieve carbon neutrality and protect the planet within the next three decades.
We know what the goal is, but how do we achieve carbon neutrality? There are several different ways, from reducing energy consumption, improving energy efficiency or transitioning to a renewable energy consumption model to using financial mechanisms that change our production and consumption habits. Read on to find out what each of these measures involves.
What path should we take to achieve carbon neutrality?
- Carbon neutrality: Where do we start?
- The road to carbon neutrality
- Cutting emissions
- Energy taxation
- Carbon market
- Tariff on polluting products
- Taxonomy of sustainable activities
Carbon neutrality: Where do we start?
In early June 2020, global daily CO2 emissions were almost back to 2019 levels, i.e. 62% higher than at that start of climate change negotiations in 1990.
The situation has not improved over the course of this year. COVID-19 has not slowed climate change, as confirmed by the United in Science report. Following a transitional reduction resulting from lockdown measures and economic slowdown, carbon dioxide emissions are on track to reach pre-pandemic levels. We can no longer hold off taking drastic measures if carbon neutrality is to be achieved by 2050.
The road to carbon neutrality
Nowadays, every facet of our life is related to the environment. Our production and consumption habits, based on the use of fossil fuels such as oil, coal or natural gas, leaves a damaging footprint on the planet.
The plan for achieving neutrality must involve strategies that help us reduce greenhouse gas emissions, that opt for economic growth not contingent upon resource use and, of course, that leave no one behind. Only in this way can we reduce carbon dioxide emissions and adopt a more sustainable model.
The first measure to reduce CO2 emissions that we will discuss is also the most logical. Moving towards carbon neutrality first requires governments and businesses to commit to reducing greenhouse gas emissions.
To achieve this objective, we will need to act in all sectors of our economy: investing in environmentally friendly technologies; supporting industry to innovate; rolling out cleaner, cheaper and healthier public and private transport systems; decarbonising the energy sector; ensuring that buildings are more energy efficient and working with international partners to improve global environmental standards.
In this sense, the Green Deal and investment in renewable energies will be crucial. The plans of the European Green Deal will be essential to rebuilding European economies by reconciling progress with the health of the planet. This is the best opportunity we have to overcome the COVID-19 crisis and achieve carbon neutrality.
Today, it is still impossible to achieve zero emissions in many of our activities. But, for those who are not yet able to avoid polluting, there are mechanisms such as energy taxation designed to offset their CO2 emissions.
It is important to note that carbon neutrality is not achieved through energy taxation alone. However, fiscal policy is an important instrument for governments to ensure that the objectives of the energy union are achieved and, in particular, to facilitate the transition to green energy, respecting the principle of subsidiarity and proportionality. Well-designed systems of energy taxation encourage citizens and investors to choose sustainability and clean energy sources over pollutants.
In the fight against climate change, one of the mechanisms that has proven to be more efficient in recent years is carbon pricing. This concept stems from the need to take into account the environmental, social and economic damage caused by emitting polluting gases, which economists call "assuming a negative externality".
To address this, a price is allocated to greenhouse gas emissions that helps redirect investment from governments and companies towards less polluting production and consumption models.
The first attempt to set the cost of emitting polluting gases was made through the creation of emissions markets, where a maximum allowable volume of emissions is established. Setting a carbon price has many benefits:
- It monetarily quantifies emissions, so it holds emitters accountable.
- It reveals hidden costs and redirects investments towards socially and environmentally responsible projects.
- It encourages energy efficiency measures to be adopted.
- It promotes innovation in clean technologies.
- It helps emitters to economically, socially and environmentally offset the impact of their emissions.
Tariffs on polluting products
The CO2 border tax applies to imported goods based on their carbon intensity, i.e. the carbon emissions required to produce those goods. This means that companies have to pay an import fee equivalent to the cost of the CO2 emission permits that domestic companies pay to produce the same product.
It is a way to protect manufacturers who bear the highest costs in order to comply with climate policy from those who can produce goods in countries where climate standards are lower.
Taxonomy of sustainable activities
In 2018, the European Union designed a plan to contribute towards moving private capital toward sustainable investments. To this end, it produced a classification of 72 activities that must fulfil, in a measurable manner, these three criteria for sustainability:
- Contribute to a carbon neutral economy.
- Not significantly damage other environmental objectives.
- Carry out activity with a minimum of standards.
The European taxonomy for sustainable finance establishes which economic activities contribute to the European Union's environmental targets, such as mitigating and adapting to climate change. This asset listing allows investors to know objectively whether an activity is aligned with the sustainability goals of the Paris Agreement and the UN Sustainable Development Goals.
As we said at the beginning of this article, we have three decades to achieve carbon neutrality. Thirty years in which, with the combined effort of governments, businesses and citizens, we can transform our society and our economy in order to mitigate the effects of global warming. It's not too late, but now is time to follow a shared plan to become emissions neutral.