Glossary entry

Net Zero Target

Definitions

Contracts definitions

Option 1 (as defined in Frank’s Clause)

Net Zero Target means a reduction of Greenhouse Gas Emissions from all operations [including value and supply chains] to net zero by [INSERT DATE] so there is a balance between sources and sinks of Greenhouse Gases in a calendar year and for each subsequent year thereafter.

Option 2 (as defined in Owen’s Clause)

Net Zero Target means a net reduction of Greenhouse Gas emissions from all operations [including value and supply chains] to zero by a specified date so there is a balance between sources and sinks of Greenhouse Gases in a calendar year and for each subsequent year thereafter.

Option 3

Net Zero Target means that the balance between Greenhouse Gas emissions from all operations and Greenhouse Gas removals, accounted for by credits from either Carbon Insetting or Carbon Offsetting projects, is zero by [specified date].

Model laws definition

Net Zero Target

Net Zero Target means the net reduction of Greenhouse Gas emissions from all operations to zero by [specified date] so there is a balance between the emissions by sources and removals by sinks of Greenhouse Gases. A Net Zero Target is met when residual emissions are fully offset by Greenhouse Gas removals.

Drafting notes

A number of countries have already set Net Zero Targets, or committed to do so, for reaching net zero emissions on timescales compatible with the Paris Agreement temperature goals. They include the UK, France, Spain, Denmark, Portugal, New Zealand, Chile, Costa Rica (2050), Sweden (2045), Iceland (2040), Finland (2035) and Norway (2030).

The concept of net zero is the same as that of Carbon Neutrality.

The Net Zero Target date in the contract’s definition should align with the relevant organisation’s target. This will vary, but for many organisations it will be 2050.

Application

Supply chain clauses, national climate laws, green leases.

Used in Zack’s Clause [SPA/Investment Agreement Warranties], Gordon’s Clause [Capital Markets Due Diligence Questionnaire] and Sienna’s Clause [Green Acquisition Obligations].