Glossary entry

Net Zero Target

Definitions

Option 1 - For agreements where net zero is a defined term

Net Zero Target  means a target to achieve Net Zero by [2050/ Insert earlier date] and validated by [the Science Based Targets initiative/ Insert other standard].

Option 2 - For agreements where net zero is not defined

Net Zero Target  means a target to reduce and remove GHG Emissions, including by offsetting Residual Emissions, to achieve a balance between [the Party’s] sources and sinks of GHGs. This must be achieved by [2050/ Insert earlier date] and align with [the goals of the Paris Agreement/ Paris Agreement Goals].

Option 3 - Short form for non-disclosure agreements (NDAs) and heads of terms

Net Zero Target means the goal of balancing a party’s emissions and removals of greenhouse gases. This must be done by [2050/Insert earlier date] and aligned with the Paris Agreement Goals.

Option 4

Net Zero Target  means the net reduction of Greenhouse Gases (GHGs) from all sources to zero by [insert date] so that there is a balance between emissions by sources and removals by sinks of Greenhouse Gases that is consistent with the goals of the Paris Agreement, taking into account the need for a just transition.

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Drafting notes

Net zero target setting

A number of countries have already set net zero targets (or have committed to do so) for reaching net zero emissions on timescales compatible with the Paris Agreement temperature goals.

The net zero tracker shows each countries’ targets and progress. Organisations must ensure that their own net zero targets are also compatible with the Paris Agreement temperature goals.

Increasing climate ambition

To increase the climate ambition of these definition, contract writers using this term need to include a requirement that the party adopt a Science Based Target validated by the Science Based Targets initiative.

Option 4

The words ‘all sources’ in option 4 refer to Scope 1, 2 and 3 Emissions. If you intend that the definition refers to only one or two of these categories of emissions, you will need to amend the reference to ‘all sources’.

Interim target setting

To ensure that a net zero target is met, organisations and countries should set interim milestones that describe their trajectory to net zero. The appropriate trajectory will depend on the sector[s], level of ambition and available investment for the relevant entities/country, and is likely to be the result of advice from a Climate Professional.

Net zero target date

The net zero target date should align with the organisation’s net zero target date. This will vary, but for many organisations their net zero target date will be 2050.

Distinguishing net zero from carbon neutral

While the terms Net Zero and Carbon Neutral are used interchangeably, the concept of net zero is distinct from carbon neutrality in several respects:

  • Carbon neutrality can be achieved entirely through offsetting, allowing companies to continue to emit greenhouse gases as normal.
  • Net zero, while it allows for some offsetting, requires companies to reduce their greenhouse gas emissions to achieve the Paris Agreement’s temperature goals.
  • The Carbon Trust differentiated the two terms using PAS 2060, an internationally-recognised standard, to define carbon neutral and SBTi’s draft net zero definition to define net zero.

It is important to keep in mind that net zero and carbon neutral are distinct terms that mean different things. Contract writers need to use each term carefully and precisely in their contracts.

Application

Supply chain clauses, national climate laws, green leases, investment agreements and corporate governance documents.