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What Is Net Zero?

Net zero is a possible future state where the net increase in heat-trapping air pollution — that is, emissions minus removals — is zero. Figure 1 illustrates the balance between emission and removals in a net-zero state as well as the imbalance in the current state.

Figure 1. Net-Zero Emissions at the Global Level
Figure-1-Net-Zero

Source: “Foundations for Science-Based Net-Zero Target Setting in the Corporate Sector,” p. 13.

The term “net zero” was born from the work of the United Nation’s climate science group, the Intergovernmental Panel on Climate Change (IPCC), which concluded the following:

  1. Anthropogenic (i.e., human) activity has contributed to global warming by increasing the atmospheric concentration of greenhouse gases (GHGs), such as carbon dioxide (CO2).
  2. Global temperature rise must be limited to 1.5°C above pre-industrial levels for the best chance of avoiding the worst impacts of climate change.

Net zero always implies a balance between human-generated emissions and removals (that is, it excludes emissions and removals from natural processes), but it often carries different nuances in different contexts. For example, in some contexts the term might be used to refer to specific entities, such as companies or countries; in others, it might refer to the entire world. Sometimes, the term implies a specific target date. For example, many governments aim to attain net zero by 2050, so this target date is part of their definition of net zero. Furthermore, some governments may include additional goals or constraints — like equity, sustainable development, and the eradication of poverty — in their definitions of net zero, reflecting their commitments in the Paris Agreement.

In our CFA Institute Research and Policy Center work, unless otherwise noted, net zero refers to a possible future, ongoing, global state where the net increase in GHG emissions from human activities is zero.