Sustainability

Carbon neutral vs net zero – what’s the difference?

19 May 2023 3 min read

As the transition to a lower-carbon world gathers pace, governments, industries and organisations globally are setting carbon reduction targets. Whether these are ambitious, achievable or merely greenwashing, it can be difficult to work out, especially as the language around climate change continues to evolve.

Three phrases commonly used to describe emissions reductions are:

  • carbon neutral
  • net zero
  • net zero carbon emissions.

While they are often used — and understood — interchangeably, there are some subtle but important differences between them, which we explain below. It’s important to note that these definitions are provided as currently understood, and may evolve further.

Although NGS Super describes its target as a carbon-neutral investment portfolio by 2030, the actions the Fund is taking go somewhat beyond the definition of ‘carbon neutral’ described below.

What emissions are included?

Carbon neutral Net zero Net zero carbon emissions
Generally this includes only carbon All greenhouse gases Carbon

NGS is measuring and reducing CO2e — this is a term that describes a number of different greenhouse gases in a common unit, so it includes more than just carbon.

In what part of the business are emissions being reduced?

Carbon neutral Net zero Net zero carbon emissions
Can be a selected or defined part of the business Implies a reduction of greenhouse gas emissions across the whole supply chain of the business Implies a reduction of carbon across the whole supply chain of the business

NGS’s carbon-neutral target applies to the financed emissions of the Diversified (MySuper) investment option.

Can offsets or carbon credits be used to achieve the goal?

Carbon neutral Net zero Net zero carbon emissions
Yes Yes Yes

NGS expects that we will need to use some carbon credits, offsets or carbon-positive investments to achieve our goal.

Is there an implied obligation to actively reduce emissions by changing behaviour?

Carbon neutral Net zero Net zero carbon emissions
No.
There is no implied commitment to reduce overall emissions.
Yes.
It is implied that behaviour change is the main driver of emissions reduction, and offsets are used only for those emissions that cannot be reduced by behaviour change.
Yes.
It is implied that behaviour change is the main driver of emissions reduction, and offsets are used only for those emissions that cannot be reduced by behaviour change.

While NGS refers to its goal as a carbon-neutral investment portfolio, the work towards this goal reduces overall emissions, with offsets used only for those emissions that cannot be reduced by behaviour change.

NGS Super is genuinely committed to our target of a carbon-neutral investment portfolio by 2030, which we have confirmed we are on track to achieve. In the interests of transparency to our members, we will continue to clarify how we are working to achieve this goal, as well as what the goal itself encompasses.

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