Cutting carbon emissions has become a central focus of countries and companies alike in the past decade. The oil majors are racing to ‘go green, Microsoft has pledged to go ‘carbon negative’, and over 20 nations have either committed to or achieved net-zero carbon targets. For public companies, the incentives to go green are clear, with a recent boom in ESG investing, the continued threat of activist divestment, and a growing body of government regulation. Meanwhile, for governments, the environment is becoming an increasingly important electoral issue and political parties are eager to be seen as being proactive on the issue. But just as the ESG investment boom has led to an increase in the phenomenon of ‘greenwashing’, countries who are eager to make grand statements about being carbon zero within a decade or two may be overselling exactly what it is that they are doing.
Climate change is, by its very nature, a global problem. With that in mind, it is possible for one country to reduce its carbon emissions to zero without any reduction in the level of carbon emitted worldwide. As long as that same country continues to trade and consume, the carbon-reliant products it needs will simply be imported from a nation without any limits on carbon emissions. To claim ‘real’ net-zero emissions, countries would have to go significantly further.
That isn’t to say that the net-zero initiatives are entirely without merit. Increasing renewable energy usage, building more energy-efficient homes, and electrifying transportation would all have a tangible effect on decreasing global carbon emissions. But, as economist Dieter Helm points out in his recent book, if an individual state wants to truly become a net-zero carbon emitter, then it would need to have a carbon tax at its border as well as reducing its production of carbon domestically. That would be a tax to offset the carbon footprint of the country’s imports. For example, the UK (the first major economy to pass a net zero emissions law) would have to levy a tax against Chinese products made using carbon-intensive energy sources. The geopolitical and economic risk of such a move would be enormous however, which is why most of the nations that are acting to counter carbon emissions have opted for the less effective but politically popular policy of a net zero emissions target.
As the social, economic, and political power of environmental change grows, observers must remain vigilant when it comes to hyperbolic claims about carbon. Just as energy production is driven by energy consumption, it is consumption that drives our production of carbon. The idea that a country can significantly reduce carbon production without a reduction in its consumption simply does not stand up to scrutiny. To create a truly net-zero carbon emissions future, consumption will have to drop and the cost of living will have to increase or technology will have to advance rapidly.
By Josh Owens for Oilprice.com
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