What is decarbonisation?

What is decarbonisation?

Net Zero/0, Decarbonisation, Carbon Neutral, Carbon Footprint ......

In June 2019 the UK Government committed the UK to a 100% reduction of net greenhouse gas emissions by 2050 compared to 1990 levels.  This commitment, backed by legislation, is known as the net zero target.

Greenhouse gases – let sunlight pass through the atmosphere but stop the heat from the sunlight going back out into space. Without them the earth would be -18 °C, but over time, they have increased significantly, this has led to increased trapped heat which has contributed to global warming and creates climate change.

People often use the terms ‘carbon neutral’ and ‘net zero’ as though they’re the same thing, but there is a slight difference.

Carbon Neutral means the offsetting of the carbon emissions produced, this can be done by planting trees, carbon capture or supporting renewable energy programmes. Whilst this can speed up the reduction in carbon emission levels in the short term, an important part of the transition, this doesn’t necessarily mean, however, that you are net zero, as you might be not be reducing carbon emissions, only offsetting them.

Net zero goes beyond the offsetting or removal of just carbon emissions. Net zero refers to all greenhouse gases being emitted into the atmosphere, such as methane (CH4), nitrous oxide (N2O) and other hydrofluorocarbons.

As explained above, net zero is all about helping to reduce to zero (compared to 1990 levels) the greenhouse gases already in the Earth’s atmosphere, meaning carbon removal will also be required.

These Net Zero Guidelines set a common path by: 

  • defining  “net zero” and its related terms, such as greenhouse gas removals, offsetting, and value chain. The guidelines clarify differences in scope between direct emissions, indirect emissions from purchased energy, and other indirect emissions arising from an organization’s activities;
  • setting high-level principles for all actors wanting to achieve climate neutrality;
  • offering guidance on actions to achieve net zero as soon as possible and by 2050 at the very latest;
  • providing transparent communication, credible claims, and consistent reporting on emissions, reductions, and removals.

The Guidelines build on momentum of current voluntary initiatives and help increase their impact. Globally accepted “net zero” claims are easier to compare.  They create an ambition loop that can be supported through internationally accepted regulations

Find out more – ISO Net Zero Guidelines

The UK’s 2050 Net Zero target follows years of national and international activity to tackle climate change:

November 2008 The UK Parliament approves the Climate Change Act, a law committing the UK to an 80% reduction of net greenhouse gases by 2050 compared to 1990 levels.  

December 2015 At the 21st UN Climate Change Conference of the Parties (COP21), 196 countries adopt the Paris Agreement. This international treaty aims to limit global warming to (ideally) 1.5ºC, compared to pre-industrial levels. The nations involved agree to work together to stabilise global greenhouse gas emissions, then reduce them.

October 2018 The Intergovernmental Panel on Climate Change (IPCC) publishes a report stating that global greenhouse gas emissions need to reach net zero by around 2050 for there to be any possibility of meeting the Paris Agreement’s global warming target of no more than 1.5ºC.  

May 2019 Asked to advise on the UK Government’s and devolved nations’ long-term targets for greenhouse gas emissions, the Climate Change Committee (CCC) recommends that:

  • the UK should aim for net zero emissions by 2050 rather than just the 80% reduction committed to in the Climate Change (2008) Act.
  • Scotland should implement a net zero date of 2045, as a reflection of its “greater relative capacity to remove emissions than the UK as a whole”.
  • Wales should aim to reduce greenhouse gas emissions by 95% by 2050, due to it having “less opportunity for CO2 storage and relatively high agricultural emissions that are hard to reduce”.

June 2019   The UK Government introduces an amendment to the Climate Change Act (2008) legally committing the UK to a 100% reduction in greenhouse gases by 2050 from 1990 levels, as opposed to 80% reduction set in 2008.

April 2021 In its Sixth Carbon Budget, the UK Government commits to setting down in law a new target to reduce emissions by 78% by 2035, compared to 1990 levels.

The legislation was passed in June 2021 as the The Carbon Budget Order 2021

March 2023 UK Government published its Carbon Budget Delivery Plan setting out policies, timescales and delivery risks associated with its Carbon Budgets between 2023 –2037

In the last few years, there has been unprecedented action for climate change, including international student strikes, climate protests and a strengthening of environmental regulations.

For businesses, the physical risks from climate change itself, in addition to the risks from societal responses to the climate emergency, have made climate change an issue that cannot be ignored.

The government has set out the national targets for reducing carbon emissions in legislation, what we see will now be an increasing number of new rules and regulations in order to ensure that the government are able to meet these legal targets.

Increasing government regulations

The UK government’s response to the climate emergency was to set a net zero emissions target by 2050.

To meet the target consecutive governments have increased taxes to stimulate change and are likely to continue doing so: Environmental taxes, reliefs and schemes for businesses: Overview

Environmental taxes, using an internationally agreed framework, raised £47.4 billion in the UK in 2022, up 6.9% from £44.3 billion in 2021.[1]

Landfill Tax

The landfill tax is a tax on waste disposal in landfill sites. The standard rate increased from GBP 98.60 per tonne to GBP 102.10 per tonne from 1 April 2023. The reduced rate for inert waste increased from GBP 3.15 to GBP 3.25 from 1 April 2023.

Climate Change Levy

The climate change levy is a tax on energy used in the United Kingdom, such as electricity, gas, coal, etc., and is charged at rates that depend on the nature of the fuel used. Increases of the main rate of Climate Change Levy (CCL) for gas to meet the frozen electricity rate, with the main rate for solid fuels being increased proportionally to gas, both with effect from 1 April 2024.

Aggregates Levy

The aggregates levy is a tax on the extraction or importation of sand, gravel, and crushed rock for commercial exploitation in the United Kingdom. The rate of tax is GBP 2.00 per tonne and is due to increase to GBP 2.03 per tonne from 1 April 2024.

Plastic packaging tax

The government introduced a tax on the production and import of plastic packaging from 1 April 2022. This tax applies to plastic packaging that does not contain at least 30% recycled plastic. The rate of tax increased from GBP 210.82 per tonne to GBP 217.85 per tonne from 1 April 2024

Carbon Border Adjustment Mechanism (CBAM)

The UK government is currently consulting upon the planned UK CBAM, to be imposed on imports into the UK of certain carbon intensive goods from the following sectors: aluminium; cement; ceramics; fertilisers; glass; hydrogen; and iron & steel, to ensure there is no offshoring of emissions. 

Consultation on the Introduction_of_a_UK_carbon_border_adjustment_mechanism_from_January_2027

The UK CBAM will place a carbon price on some of the most emissions intensive industrial goods imported to the UK, from the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron & steel sectors, that are at risk of carbon leakage, ensuring that a carbon price is paid regardless of where the goods are produced. Carbon leakage occurs when companies based in the UK move carbon-intensive production abroad to countries where less stringent climate policies are in place than in the UK, or when UK products get replaced by more carbon-intensive imports. The UK CBAM will be a key part of the government’s wider strategy to tackle carbon leakage risk. 

This is similar to the EU CBAM which on the 1st of October 2023, entered into application in its transitional phase, with the first reporting period for importers ending 31 January 2024.

Carbon Border Adjustment Mechanism - European Commission

Countries all around the world are now taking action.

Scotland, Sweden, and Germany have legally binding net zero targets for 2045. France, Denmark, Spain, Hungary, and Luxemburg have set their net zero targets for  2050. Japan, Korea, Canada, and New Zealand have passed laws committing them to achieving net zero by 2050 while Ireland, Chile and Fiji have proposed legislation.

In addition to the cost of domestic regulations, businesses that export goods or services will need to account for the tougher environmental regulations in their target markets such as the EU (European Union) Carbon Border Adjustment Mechanism

Pressure from main contractors on supply chain

Leading UK businesses like BP, Ericsson, IKEA, BT Group, British Airways, Unilever, Shell, and Sainsbury’s, are already committed to reducing their greenhouse gas emissions and many of them have set targets to reach net-zero emissions in their supply chains (Scope 3 emissions). These commitments are finding their way into procurement processes and requests for proposals; purchasers are requiring suppliers to deliver the same goods or services with lower associated emissions and are expecting them to match their climate ambitions.

Pressure from the banks

Most financial institutions are now committed to ensuring that they do not directly or indirectly finance activities that will have a negative impact on the environment. These commitments will impact the ease with which businesses can access trade finance and insurance products.

Pressure from employees

In a global recession, most people are thankful to have a job, however, research suggests that employees are more likely to be satisfied with their jobs if they are working for a company that is perceived to be "green." The financial performance of companies fails to correlate with employee happiness.

HR Magazine - Sustainability rates highly in employee expectations despite COVID-19 worries

Changing consumer behaviour

Companies are much more likely to be asked by customers/service users to reduce their environmental impact than three years ago. Consumers are more aware of the impact of their activities on the environment and simply offering good products and customer service is no longer sufficient. Consumers want to understand the impact of the choices they are making. They are demanding and opting for green products that are not only safer for them to use but are also environment friendly.

Do consumers care about sustainability & ESG claims? | McKinsey

Consumers Demand Sustainable Products And Shopping Formats / Forbes

Sustainable consumer behaviour and lifestyle 2023 | Deloitte UK

[1]UK environmental taxes - Office for National Statistics (ons.gov.uk)

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