Net-Zero Criteria Draft For Public Consultation PDF

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Net-Zero Criteria Draft for Public Consultation1/26/2021

Table of ContentsIntroductionBusiness Ambition for 1.5 CAbout the criteria446Overview6Criteria organization7Documents in the Net-Zero Standard and key supporting work9How to read this document and submit feedback12GENERAL CRITERIA13I.Net-Zero Target Timeframe and MilestonesConsultation questionsII. Greenhouse Gas InventoryNET-ZERO TARGET CRITERIAIII.Emissions Abatement: AmbitionConsultation questionsIV.Emissions Abatement: Target BoundaryConsultation questionsV. Neutralisation131516181824253031Consultation questions43INTERIM TARGET CRITERIA46VI.Interim Science-based TargetsConsultation questionsCOMMUNICATION, CLAIMS, AND VALIDITY CRITERIAVII.Target Formulation and ReportingConsultation questionsVIII.Recalculation and Target ValidityAPPENDIX: OPTIONAL COMPENSATION46505252545556Net-Zero Criteria Draft for Public ConsultationVersion 1.02

IX. COMPENSATION ACTIONS56Consultation questions60References62Net-Zero Criteria Draft for Public ConsultationVersion 1.03

IntroductionAccording to the 2018 report by the Intergovernmental Panel on Climate Change (IPCC), to limitglobal warming to 1.5 C above pre-industrial levels and avoid the most catastrophic impacts ofclimate change, the world must halve CO2 emissions by 2030 and reach net-zero CO2 emissionsby 2050 (IPCC, 2018, p. 14). Moreover, to reach a state in which human-caused greenhouse gas(GHG) emissions no longer contribute to global warming means preventing the accumulation ofall GHGs in the atmosphere, which the Paris Agreement calls to achieve in the second half ofthe century (Paris Agreement, 2015, p. 4).Recognizing the importance of keeping global warming to 1.5 C, companies are increasinglyadopting net-zero climate targets. While the growing interest in net-zero targets represents anunparalleled opportunity to drive corporate climate action, it also creates the pressing need fora common understanding of “net-zero,” as existing targets vary widely in boundaries,definitions, timeframes, and mitigation strategies used. To avoid confusion and inconsistentclaims that potentially undermine the credibility and impact of corporate net-zero targets, ascience-based framework is needed to translate the growing momentum behind net-zerotargets into action consistent with achieving climate stabilization.To address this need, the SBTi is undertaking an inclusive, stakeholder-informed process todevelop the Net-Zero Standard, which will enable companies to set robust and credible netzero targets in line with a 1.5 C future. The Standard will include a set of criteria for net-zerotargets, allowing companies to have their net-zero targets validated by the SBTi, as well as userfriendly guidance for net-zero target-setting.This document provides the first draft of criteria for net-zero targets, a significant milestonefollowing the SBTi’s publication of Foundations for Net-Zero Target-setting in the CorporateSector in September 2020. This document has been produced with input from an ExpertAdvisory Group consisting of scientific experts, academics, company representatives and civilsociety groups. Due to the growing importance of and interest in corporate net-zero targetsetting, this document is now open for public consultation and input until February 26, 2021.We encourage all interested parties to review this document and provide input via thefeedback survey. The full Net-Zero Standard will be finalized in late 2021.Business Ambition for 1.5 CNet-Zero Criteria Draft for Public ConsultationVersion 1.04

As of January 2021, more than 375 companies have committed to do their share through theSBTi Business Ambition for 1.5 C campaign and are counted among the global leaderssupporting the transition to a net-zero future through the Race to Zero campaign of theUNFCCC leading up to COP26 later this year. We encourage you to join them by signing the SBTiBusiness Ambition for 1.5 C commitment letter and commit to science-based net-zeroemissions targets by 2050 with interim science-based targets (SBTs).Net-Zero Criteria Draft for Public ConsultationVersion 1.05

About the criteriaOverviewThe SBTi’s Net-Zero Criteria aim to ensure that corporate net-zero targets, which arecommitments to reach a state of no impact on the climate from greenhouse gas (GHG)emissions, are consistent and robust. Guided by science, these criteria provide a definition ofwhat is needed for companies to set science-based net-zero targets that are aligned with theambition of the Paris Agreement. As explained in detail in Foundations for Science-based NetZero Target Setting in the Corporate Sector, this objective implies two conditions:1. Achieving a scale of value chain emissions reductions consistent with the depth ofabatement in pathways that limit warming to 1.5 C with no or low overshoot and;2. Neutralising the impact of any source of residual emissions that is unfeasible toeliminate by permanently removing an equivalent volume of atmospheric CO2.1Both these conditions – deep decarbonisation and neutralisation of residual emissions withpermanent carbon removal – need to be met by science-based net-zero targets and areaddressed by the criteria. Net-zero targets also must include a target year by when a companyplans to achieve its target.Pathways that limit warming to 1.5 C with no or low overshoot require rapid transformativeclimate action in all sectors, consistent with reducing global emissions by about half by 2030(United Nations Environment Programme, 2020, p. 10). From an emissions budget perspective,near-term reductions are crucial. Accordingly, when companies set net-zero targets with atarget year more than 10 or 15 years from the target-setting date, interim science-basedtargets (SBTs) are also required. These targets provide accountability by indicating clearmilestones during a company’s transition to net-zero. Throughout this document, the term“SBT” refers specifically to 5-15 year emissions reduction targets.Once they have met the criteria to set net-zero targets, companies are encouraged tocompensate for unabated value chain emissions during their transition to net-zero. The SBTifollows a broad mitigation hierarchy approach whereby companies are required to reduce their1 Residual emissions are emissions sources that remain unabated by the time net-zero is reached in 1.5C mitigationpathways with low or no overshoot (Foundations for Science-based Net-zero Target Setting, pp. 7, 32-34). The SBTiis exploring a range of approaches for determining residual emissions globally, by sector, and by activity, which willbe included in the public consultation of Net-Zero GuidanceNet-Zero Criteria Draft for Public ConsultationVersion 1.06

own emissions before engaging in neutralisation activities and subsequent compensation(Ekstrom et al., 2015). A set of optional and additional recommendations are included forcompanies seeking to compensate for unabated emissions by committing to provide financialsupport to projects, programs, and solutions with quantifiable benefits to climate, people, andnature. In this document, the term compensation refers to a companies’ actions or investmentsthat mitigate GHG emissions beyond those covered by their SBTs and net-zero targets. It mayinclude actions such as purchasing high-quality carbon credits and providing direct financialsupport to projects that generate positive impact outside a company’s value chain.Figure 0.1. Graphical representation of a net-zero target, interim SBT, and optionalcompensationCriteria organizationThe criteria are organized in four chapters. The first chapter, General Criteria, lays out theoverarching timeframe requirements (I. Net-Zero Target Timeframe and Milestones) andcriteria that ensure companies account for all relevant emissions and removals following theGreenhouse Gas Protocol (II. Greenhouse Gas Inventory). The second chapter, Net-zero TargetCriteria, addresses “how much” value chain emissions need to be reduced (III. EmissionsAbatement: Ambition), how companies may define the boundary of emissions abatement in anet-zero target (IV. Emissions Abatement: Target Boundary), and criteria for neutralisingNet-Zero Criteria Draft for Public ConsultationVersion 1.07

unabated emissions with carbon removals (V. Neutralisation). The third chapter, Interim TargetCriteria, lays out the requirement for companies with a net-zero target more than 10 or 15years from the date of submission to also have interim SBTs covering a shorter timeframe (VI.Interim Science-based Targets). The final chapter, Communication, Claims, and Validity,specifies official target wording that must be publicly available and reporting requirements (VII.Target Formulation and Reporting) and conditions that trigger a mandatory target recalculation(VIII. Target Validity and Recalculation).The appendix Optional Compensation includes recommendations for companies to conductsupplementary compensation by providing financial support to projects, programs, andsolutions with quantifiable benefits to climate, people, and nature (IX. Compensation Actions).Net-Zero Criteria Draft for Public ConsultationVersion 1.08

Documents in the Net-Zero Standard and key supporting workThe Net-Zero Criteria are part of the SBTi’s Net-Zero Standard. The Net-Zero Standard, whichentails both the Criteria and forthcoming Net-Zero Guidance, will be finalized by November2021 in advance of the 2021 United Nations Climate Change Conference (COP26). Publicconsultation of the Net-Zero Guidance is scheduled to begin in July 2021. These documentscover corporate net-zero targets and do not cover financial institution net-zero targets. TheSBTi’s financial sector project is expected to develop separate net-zero resources for financialinstitutions.Table 0.1 describes how content is divided between the Net-Zero Criteria and the forthcomingNet-Zero Guidance. Table 0.2 highlights key documents and projects that are separate from theNet-Zero Standard but contain important linkages.Table 0.1. Description of the Net-Zero Criteria and Net-Zero GuidanceDocumentDescriptionNet-Zero CriteriaThis document contains the criteria that need to be met forNet-Zero targets to be validated by the Science BasedTargets initiative.Some criteria are assessed relative to climate changemitigation scenarios, which are regularly updated by thescientific community (e.g., emissions must be abated by anamount consistent with global net-zero in scenarios thatlimit warming to 1.5 C). Although target-setting criteriaremain fixed, specific quantitative benchmarks and targetsetting methods evolve with science and are outside thescope of the criteria.In Section V (Neutralisation) and Section IX (CompensationActions), there are criteria that require companies todemonstrate that a principle is met without specifyingprecisely what mechanisms are considered eligible (e.g.,“carbon removal activities must have mechanisms in place toaddress the impact of potential non-permanence”) . Thewording of these criteria is meant to accommodatestandards, services, and instruments that are still underNet-Zero Criteria Draft for Public ConsultationVersion 1.09

development or to demonstrate that the principle can bemet in a variety of ways that have not yet been compiled in alist. This information is planned for inclusion in the Net-ZeroGuidance.Net-Zero Guidance(forthcoming)As a compliment to the Net-Zero Criteria, the Guidance willsupport companies with the formulation andimplementation of net-zero targets. The Guidance willinclude a user-friendly description of target-setting methodsand quantitative benchmarks reflecting the most recentscience, as well as an explanation of how to develop targetsusing the Target Setting Tool It will also establish a list ofoptions that are eligible to meet criteria where intermediatestandards, services, or instruments are used by companies(e.g., carbon credits).Table 0.2. Description of key work that is separate from the Net-Zero StandardItemDeveloperDescriptionTarget Setting Tool SBTiCompanies use the Science-based Target Setting Toolto model SBTs that are aligned with SBTi Criteria andapproved methods. A separate or updated tool willbe published to enable companies to set eligible netzero targets.SBTi CriteriaSBTiMany companies will need to set interim SBTs thatmeet the current SBTi Criteria to be eligible to have anet-zero target validated by the SBTi.GHG ProtocolCorporateStandardGHG ProtocolCompanies must have emissions inventories that arealigned with the GHG Protocol Corporate Standard,which contains internationally accepted guidance oncorporate GHG accounting.GHG Protocol Land GHG ProtocolSector andRemovals InitiativeThis project is developing internationally acceptedguidance on carbon removal accounting, bioenergyaccounting, and topics related to land-use emissions.The SBTi’s Net-Zero Standard will require companiesto report carbon removals consistent with thisforthcoming guidance. Because the draft GHGNet-Zero Criteria Draft for Public ConsultationVersion 1.010

Protocol guidance is not scheduled for publicationuntil Q3 2021, refinements to the SBTi’s Net-ZeroStandard may be needed at a future date to ensure asmuch synchronisation as possible.Net-Zero Criteria Draft for Public ConsultationVersion 1.011

How to read this document and submit feedbackThis document includes supporting text and examples to help readers understand the practicalimplications and rationale of draft criteria. Each section begins with an overview. Next, thedraft criteria are presented in table form with a column used to provide additional context forthe public consultation. Criteria highlighted yellow are linked to consultation questions, whichare included at the end of each section to check for agreement with the draft text of specificcriteria or to collect feedback on 2-3 versions of draft text under consideration. An example isshown by Table 0.3. Several text boxes are also included to provide a detailed explanation ofkey topics.Feedback to consultation questions should be submitted through the feedback survey.Table 0.3. Example table of draft criteria and descriptionCriteriaDescriptionThis column used for draft criteria textThis column provides additional context for publicconsultation (not intended for final criteria)NZ-C. Example of criterion wherefeedback is not requestedDescription of NZ-C with practical examples andsupporting information if neededDraft criteria textNZ-C. Example of criterion wherefeedback is requested on proposedtextDescription of NZ-C with practical examples andsupporting information if neededDraft criteria textNZ-C. Example of criterion where 2-3options are provided for feedbackDescription of NZ-C with practical examples, acomparison of proposed versions, and supportinginformation if neededVersion A.Draft criteria text AVersion B.Draft criteria text BNet-Zero Criteria Draft for Public ConsultationVersion 1.012

GENERAL CRITERIAI.Net-Zero

The Net-Zero riteria are part of the STi’s Net-Zero Standard. The Net-Zero Standard, which entails both the Criteria and forthcoming Net-Zero Guidance, will be finalized by November 2021 in advance of the 2021 United Nations Climate Change Conference (COP26). Public consultation of the Net-Zero Guidance is scheduled to begin in July 2021.