Carbon neutral, net zero and zero emissions: what's the difference?

There’s a lot of climate jargon flying around these days, and it can be hard to know what is actually being promised. So what’s the real difference between ‘zero emissions’, ‘net zero emissions’ and ‘carbon neutral’, and why does it matter? Let’s break it down.

Profile Picture of Laure Legros
June 22, 2023
6 min read

With the Australian Competition and Consumer Commission vowing to crack down on corporate greenwashing, it’s important for companies and customers to get their climate terms right. Throwing around phrases like ‘carbon neutral’, ‘zero emissions’ and ‘net zero’ without proper context, or worse, without any evidence to back them up, is misleading and deceptive. 

It makes it harder for consumers to choose genuinely good brands, and it enables poor climate performers to hide behind slick marketing while continuing to pollute. It’s also pretty widespread: in its latest survey, the ACCC found 57 per cent of businesses had promoted concerning claims about their eco-credentials. In other words, they were caught ‘greenwashing’.

So what is the difference between ‘zero emissions’, ‘net zero emissions’ and ‘carbon neutral’, and why does it matter?

What does ‘carbon neutral’ mean?

This concept of ‘carbon neutral’ has been around for a long time. In fact, the term was the New Oxford American Dictionary’s word of the year way back in 2006. In short, true carbon neutrality only exists at the planetary scale when there’s a balance between the greenhouse gasses the world produces and the removal of those gasses from the atmosphere, primarily through carbon sinks (e.g. forests, oceans and soil, or engineered sinks like direct air capture or carbon capture and storage). 

The issue is, humans have been pumping out way more carbon dioxide (and other greenhouse gasses) than the earth or any technological advancements can realistically scrub up, which is causing the globe to heat dramatically. We’re way off any sense of equilibrium.

Now, beyond the planetary definition, the term ‘carbon neutrality’ has since been extended to apply to other entities like countries, companies and even products or events. The idea is that pretty much all companies that claim to be ‘carbon neutral’ rely on ‘balancing out’ their emissions through purchasing carbon offsets or credits. It’s like a trade off: they pump out carbon here, and invest in methods to absorb carbon elsewhere. Sounds simple, right? Unfortunately it’s a little more complicated than that.

The main issue is that the entire idea of offsets is not grounded in science. Second to that, the offset industry is largely unregulated (you can read more about the problems of offsets here) and it’s become an easy ‘out’ for companies to continue polluting as usual instead of making true decarbonisation efforts.

Carbon neutrality should factor in a company’s supply chain, too, including its ‘Scope 3 emissions’. These are emissions that flow up and down the value chain, and might not be within the company’s direct control; like Boeing building planes which subsequently burn jet fuel. A company can’t really describe itself as ‘carbon neutral’’ until all of its Scope 3 emissions are offset or removed.

In short, carbon neutrality can be viewed as a bit of an accounting trick. It’s not bad, necessarily, but it can be problematic, and it’s far from a perfect solution.

What does ‘net zero emissions’ mean?

As of mid-2022, more than one third of the world’s largest publicly traded companies have net zero targets (though reports show less than 5% are credible). It’s a start, but what does this really mean?

A lot of businesses tend to use ‘net zero’ and ‘carbon neutral’ interchangeably, and similarly to ‘carbon neutral’, the concept of ‘net zero’ was not originally intended for companies and there is no universally accepted definition for it (though this UN report aims to provide a frame of reference for what it means for companies and other non-state entities). It was intended for the planet as a whole, and extended to countries as part of the Paris Agreement. (We go into more details on this in our module on emissions in the WorkforClimate Academy).

This is complicated by the fact that there’s no universally accepted definition for the term ‘net zero’, and it loses some of its substance when it’s applied to businesses. 

That said, while carbon neutrality leans on the outdated idea that a company can just cancel out its emissions by purchasing offsets, net zero is the next level of ambition. It’s the idea that companies would first cut their emissions and only purchase offsets for that which absolutely cannot be reduced. This is called ‘true net zero’.

The best framework available for ‘true net zero’ is the one developed by Science Based Target (SBTi), which outlines an approximate 90% reductions in absolute emissions from the entire value chain and only around 10% (real and credible) offsets.

It’s also worth considering that contributing to global ‘net zero’ targets requires more than a commitment; it requires a solid climate transition plan that prioritises rapid decarbonisation in the short-, medium- and long-term.

What does ‘zero emissions’ mean?

‘Zero emissions’ (also sometimes described as ‘zero carbon’) means exactly what it says: the business or activity produces no greenhouse gas emissions. Zilch. Nothing. 

Right now, it’s practically impossible for a business to achieve complete zero emissions, so you shouldn’t hear this term bandied around as much (and if you do hear it, the business should provide clear and transparent evidence showing proof).  

For example, a lot of car manufacturers will brand their electric vehicles (EVs) as “zero emissions”. The fine print here is that it’s “zero emissions in the use phase of the vehicle”. However, making the vehicle still creates a lot of emissions (and often, the building phase for EVs creates more emissions than for thermal engine vehicles). You also need to consider how the electricity that powers the vehicle is produced. If it comes from fossil fuels, it creates indirect emissions, meaning the vehicle isn’t really “zero emissions”.

Don’t get us wrong – EVs are still a part of the solution for a net-zero transport sector, but we cannot say that their emission impact is absolute, complete zero.

Why does this matter?

It matters because it’s in the nature of most businesses to do as little as possible to change the status quo. Especially if it costs them money. And allowing businesses to throw around eco-friendly terms like ‘carbon neutral’, ‘net zero emissions’ and ‘zero emissions’ without oversight, accountability or context can harm the entire climate movement. 

The best thing companies can do for the climate is to decarbonise their operations and supply chains as much as possible in the effort to contribute to global net zero.

If you’d like to help your company decarbonise faster, check out the step-by-step guide in our emissions playbook, or enrol in the WorkforClimate Academy to level-up your climate knowledge and leadership skills.

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