Allow Near-term Net Zero

The optimal corporate climate target approach would be if all companies set a credible internal carbon fee and spent it wherever the impact is the biggest, reporting it as a contribution to help reach global net zero. Fixating on corporate net zero and CDR misses a lot of important things that need to be funded. This alternative approach is called Beyond Value Chain Mitigation (BVCM), and Milkywire has spent years promoting it. We launched the BVCM initiative Milkywire Climate Transformation Fund 2021 and co-wrote one of the major guides on it together with Gold Standard. I still think it’s the optimal approach, but I have realized that insisting on BVCM instead of near-term net zero effectively lowers ambition. Next week, at in-person SBTi expert working group meetings, my main message on the CDR and BVCM topics will be to allow Near-term Net Zero. Today, the SBTi makes it functionally impossible for most companies to reach net zero well before the rest of society, requiring emission reductions of ~90% before CDR can be used.   Some vanguard companies have adopted BVCM, we have 20+ donors to the CTF, but most won’t fund projects that don’t count toward their targets. The other week, I spoke to a large company that planned to reach net zero by 2030, but is now scrapping it in favor of a 2050 SBTi target. They will spend some on BVCM, but not nearly as much as they would have spent on CDR with the earlier target. Importantly, achieving near-term net zero with permanent carbon removal does not compromise integrity as long as the removals used are safe, additional, and verified. Permanent, high-quality CDR is not a lesser form of mitigation, and it is not stock-limited at a risk of running out. And paying for CDR creates pressure to reduce emissions. Companies that pay >$150 per tonne for their remaining emissions will have an extremely strong financial incentive to lower emissions (and their CDR bill) as quickly as possible.  Allowing near-term net zero will only affect a small group of low-emitting, high-profit companies. But their spending has a disproportionate impact on the CDR sector. Just like niche electronics kept solar alive in the 1970s, corporate voluntary demand is realistically the only thing that can keep the CDR sector developing before compliance markets enter in the early 2030s. This creates learning and builds capacity that all will benefit from later on. For the scale up of the CDR sector, I think it's far more important to allow companies to use permanent carbon removal to reach near-term targets, than to require them to start buying CDR for a long-term target.  Allowing near-term Net Zero only solves a very small part of the problem. The major issue is that most of the largest emitters aren’t setting or acting on emission targets, either long-term or near-term. Here, other solutions are needed. I am working on a paper on conditional targets, under which companies would set targets that articulate what share of emission reductions they can achieve on their own, and what share is conditional on strong policy. This would make it easier for hard-to-abate companies to commit to net zero, while highlighting what policy is actually required where, creating a stronger pressure on policymakers. There is no one target that fits all companies. Let the high-ambition firms with low emissions and the resources to do so reach net zero early if they wish. Continue to recommend BVCM for those able to convince their CFOs, and develop conditional pathways for the biggest emitters that expose, rather than obscure, the role of climate policy.