The fastest to react were the central state-owned enterprises (SOEs). State Power Investment Corporation (SPIC), Baowu Steel, Datang, and Huadian all stated their intention to strive for carbon peaking ahead of schedule, pushing their timelines forward to 2023 or 2025. Three Gorges Corporation and Baosteel, on the other hand, set their carbon neutrality targets for 2040 and 2050, respectively. These SOEs' carbon neutrality plans are more proactive than the government's "dual carbon targets."
Financial institutions followed suit. In public statements over the past few months, the Industrial and Commercial Bank of China, China Construction Bank, Industrial Bank, CITIC Bank, and Agricultural Bank of China announced that they would underwrite the first batch of "carbon neutral bonds," while the Bank of China supported several state-owned power companies in successfully issuing the first batch of domestic carbon neutral bonds.
Meanwhile, major internet companies have also joined the carbon neutrality race. Tencent announced its carbon neutrality target plan on January 12th, and Ant Group set its sights on achieving net-zero emissions by 2030 on March 12th. Chindata, a rising star in the data center industry that rarely sees the public eye, also announced in January that it will achieve carbon neutrality by 2030, proposing a specific implementation path centered on 100% renewable energy.
From traditional high-carbon industries such as energy and steel to emerging technology industries with rapidly increasing energy consumption and carbon emissions, new companies are joining the ranks of those striving for carbon neutrality. This is a key force in ensuring China achieves its dual-carbon goals. On April 22, Chinese President Xi Jinping proposed at the Leaders' Climate Summit to "support key industries and key enterprises to reach peak emissions first," and it is believed that more companies will join the long-term race towards carbon neutrality.
However, besides praising the companies' quick response, we also see a general lack of scientific understanding of carbon neutrality among businesses, as well as a speculative mentality of "publicity press releases first." Analyzing the public discussions surrounding "carbon neutrality" by various companies, we find five common misconceptions among Chinese enterprises that require careful consideration.
Myth 1: Talking about concepts without concrete goals and timelines
We have observed a phenomenon where many companies talk a lot about carbon neutrality in their publicity, but none of them have specific corporate carbon neutrality targets or timelines, and their actions lag behind their propaganda. Tencent announced its carbon neutrality plan as early as January this year in response to China's carbon neutrality goals, but several months have passed, and Tencent has still not presented any clear carbon neutrality targets or timelines.
A closer look at the underlying reasons reveals that, firstly, for enterprises, achieving carbon neutrality is an unavoidable trend. For example, state-owned enterprises in high-carbon-emission industries such as energy and steel face pressure to implement dual-carbon targets while also bearing the political responsibility and exemplary role of state-owned enterprises; their swift response is not surprising. For internet technology companies, their ever-increasing energy consumption and carbon emissions have attracted widespread attention, forcing them to focus on carbon neutrality. A report by Greenpeace and North China Electric Power University shows that in 2018, China's data centers consumed 160.9 billion kilowatt-hours of electricity, accounting for approximately 2% of China's total electricity consumption. It is projected that by 2023, China's data center electricity consumption will increase by 66%, with carbon emissions reaching 163 million tons. Simultaneously, internet technology companies need to project an aggressive image and cope with immense compliance pressures amidst the heated debate surrounding "anti-monopoly," making "piggybacking" on carbon neutrality an inevitable step.
Furthermore, the capital market also plays a crucial role in this process. With ESG (Environmental, Social, and Governance) investment becoming increasingly mainstream, listed companies face higher demands and expectations from investors regarding their climate actions, requiring them to project a timely and proactive stance on climate change. However, because carbon neutrality may impact future cost and benefit expectations, listed companies need to develop more rigorous plans, which may slow down the pace of proposing concrete implementation schemes.
For companies, "publicity press releases first" is more of a statement. The real first step towards carbon neutrality is to seriously study and implement carbon neutrality goals and propose more specific implementation plans and paths after making such a statement.
Myth 2: There is only an overall goal, but no specific scope of carbon emissions.
The core basis for enterprises to achieve carbon neutrality is to clearly define their carbon emissions across their entire production and operation scope, namely, carbon emissions in categories one, two, and three. Category one refers to the enterprise's direct emissions, such as fuel combustion, emissions from all company vehicles, and other fugitive emissions. Category two mainly comes from indirect emissions from purchased electricity. Category three includes a broader range of carbon emissions from purchased goods and services, upstream and downstream supply chains, and the use of sold products.
Due to differences in their business types, companies' carbon emissions vary across different categories. Generally speaking, the energy industry primarily emits carbon in Category 1 (fuel combustion), while the internet technology industry primarily emits carbon in Category 2 (purchased electricity for data centers). Therefore, companies need to specify in their carbon neutrality targets which of these categories they aim to achieve carbon neutrality, or all categories. Currently, among domestic companies, only Ant Group has explicitly stated its goal of achieving net-zero emissions in Categories 1, 2, and 3 by 2030, and Qin Huai Data has proposed achieving net-zero emissions in Categories 1 and 2.
Defining the scope of carbon emissions within the carbon neutrality goal also helps companies to analyze carbon emissions across the entire range of their operations, especially the carbon emissions from the upstream and downstream supply chains that have long been overlooked. This is conducive to building a more systematic and comprehensive carbon emissions management system.
Myth 3: Over-reliance on carbon offsetting methods such as afforestation
Carbon removal and offsetting measures such as afforestation, mangrove restoration, and increasing soil carbon storage are frequently mentioned by companies, who regard these "Natural-based Solutions (NbS)" as one of the paths to achieving carbon neutrality. For example, Ant Group and Apple both mentioned using NbS to address "emissions that cannot be reduced" in their latest announced carbon neutrality plans.
So, is NbS, represented by forest carbon sinks, a panacea for achieving carbon neutrality?
Over the past decade, the potential of NbS in achieving emission reduction targets and mitigating climate change has been widely discussed. According to more optimistic estimates, cost-effective NbS solutions could contribute about 30% of near-term climate regulation needs (Griscom et al., 2019), and there is a general international consensus that NbS helps achieve carbon neutrality and address the climate crisis.
However, there are significant loopholes in companies' efforts to achieve carbon neutrality through NbS schemes such as forest carbon sinks. Consider this: a company may obtain carbon offsets by investing in forests or other NbS schemes, but a forest fire, drought, or insect infestation could cause the carbon emissions stored in forests, soil, and other natural systems to be released back into the system during the accounting process. Although the company achieves carbon neutrality, global carbon emissions are not actually reduced.
The core issue behind this is the uncertainty surrounding the carbon sequestration role of NbS. First, the carbon storage in natural ecosystems is not permanent and is easily affected by disasters and future development and utilization, thus becoming a carbon source again. Second, using carbon as a metric, the absorption and fixation of carbon from the atmosphere by natural ecosystems is not an instantaneous process but requires several years, making it difficult to calculate using a simple formula like "planting a tree equals reducing carbon emissions by a certain amount."
Meanwhile, NbS schemes require rigorous scientific validation, and the overall benefits of different schemes vary significantly. From protecting undisturbed natural ecosystems to restoring degraded ecosystems, and then to creating new artificially managed mono-species systems (mono-species plantations, artificial green spaces), the degree of human intervention and the level of support for biodiversity vary significantly among different NbS schemes, which can lead to varying degrees of impact on the resilience and risk resistance of local biodiversity.
Only scientifically planned, effectively implemented, and equitably participatory programs based on natural ecosystems can achieve positive benefits in areas such as climate, biodiversity, and community livelihoods. Otherwise, programs that damage natural habitats, such as "planting trees in wetlands" or "planting trees in grasslands," may actually harm the climate.
In summary, nature-based solutions should not be used by companies to evade their direct emissions reduction responsibilities. Increasing the use of renewable energy and reducing dependence on fossil fuels are the top priorities for corporate carbon neutrality.
Myth 4: Avoiding the important issues and ignoring "core emission reductions"
Whether a company faces the challenge of direct emission reduction or chooses carbon offsetting is the yardstick for distinguishing whether it is truly committed to carbon neutrality or is "greenwashing".
Take Apple as an example. As mentioned earlier, Apple will use nature-based solutions to address the "non-reducible emissions." What exactly constitutes this non-reducible emissions and what percentage it represents? The company needs to provide responsible data disclosure. Apple states that "the company will directly reduce carbon emissions in its supply chain and products by 75% by 2030, while the remaining 25% will be addressed by the Restore Fund through atmospheric carbon removal." In contrast, Ant Group's carbon neutrality roadmap does not mention the proportion of its overall emissions that are "non-reducible."
In fact, this ratio directly demonstrates a company's sincerity and determination to achieve carbon neutrality. Responsible carbon neutrality requires companies to directly address and reduce emissions from their largest carbon-emitting business segments. Qinhuai Data, mentioned above, will reduce emissions from its largest carbon-emitting segments (Categories 1 and 2) through 100% renewable energy sourcing. Ford, the automaker, has committed to addressing approximately 95% of its direct carbon emissions from Categories 1 to 3, including achieving 100% zero carbon emissions from its vehicles sold in Europe by 2030.
In stark contrast, some companies' carbon reduction plans have faced widespread criticism for their "disproportionate over-reliance on carbon removal and carbon offsetting." American Airlines mentions in its carbon reduction plan that it will use carbon removal to achieve 50% of its overall emissions reductions, while International Airlines Group's figure reaches as high as 90%. Shell, the long-established oil company, also includes substantial carbon removal plans in its announced net-zero emissions reduction plan, including "planting a forest the size of Spain" as a means of carbon offsetting. Ironically, due to the limited area of forest planting and land, the global available carbon offsetting "quota" is actually quite limited. Shell alone, with its announced plan to plant 50 million hectares of forest, may have already used up one-tenth of the globally available quota.
For oil companies like Shell, the key to achieving carbon neutrality lies in reducing fossil fuel production and shifting their business model towards renewable energy production, rather than turning to carbon offsetting, which is easier to achieve but doesn't directly reduce emissions. Recent discussions on carbon neutrality in China have frequently seen oil companies undertaking initiatives such as building "carbon-neutral forests," which undoubtedly raises suspicions of "greenwashing."
Myth 5: Carbon neutrality is the end point
Finally, and often overlooked, carbon neutrality is far from the end of corporate climate action. Globally, many companies are moving beyond carbon neutrality to achieve negative carbon emissions. Global biopharmaceutical company AstraZeneca recently announced its goal of achieving negative carbon emissions across its entire value chain by 2030. Microsoft, which has already achieved its 100% renewable energy target, has also pledged to achieve negative carbon emissions by 2030. Carbon neutrality merely offsets carbon dioxide emissions, preventing additional emissions; negative carbon emissions, on the other hand, represent a net effect of eliminating carbon dioxide.
Just last week, according to Sky News, the world's largest iceberg, A68a, has melted and broken into pieces. With rising global temperatures, the stability of glaciers is becoming increasingly unstable, and glacier disasters are becoming more frequent. Regarding carbon neutrality goals, given the complexity and diversity of economic activities across society, we need to measure national and corporate climate reduction targets on a longer timescale, moving from carbon neutrality to ultimately achieving negative emissions.
Faced with ever-increasing global warming, carbon neutrality is far from the end. Only when enterprises reduce emissions more, or even achieve negative emissions, can we possibly achieve the climate goal of limiting global warming to no more than 1.5 degrees Celsius.
