Learn: Carbon accounting

Carbon Neutral vs Net Zero vs Climate Neutral

We know the language surrounding sustainability and climate action can seem complicated. A recent study by Nature found that 55% of Aussies find businesses’ environmental claims confusing.


One of the main issues is that several similar terms are often used interchangeably – including carbon neutral vs net zero vs climate neutral. However, there are distinct differences between these terms.


Here, we explain exactly what they mean and how they differ to help you better understand sustainability terminology and decide which language to use when setting targets for your business.


Note that you may still find differences in how other organisations define these terms (which causes the confusion in the first place!), but we’ve taken what we believe to be the most common and widely acknowledged definitions from industry experts.


Carbon neutral

To understand the difference between carbon neutral vs net zero, we must first look at the individual definitions of these terms.


The term carbon neutral describes an existing state when a company is compensating for all of its CO2 emissions. To achieve carbon neutrality, a business will calculate its carbon footprint and purchase carbon credits and offsets, which support projects where an equivalent amount of carbon is avoided, stored or removed from the atmosphere. In doing this, the business compensates for its carbon emissions.


A carbon-neutral strategy with carbon offsetting represents immediate action that can be taken in the short term. It is often the first step before a business has had time to amend its operations to realise the impact of reduction strategies. These changes can require significant investment and technological updates, so they are more long-term.


Trace helps companies to measure and offset their emissions and become carbon neutral, awarding a ‘carbon neutral’ badge once this step has been taken. Trace’s carbon neutral badge includes scope 3 emissions (indirect emissions from the supply chain).


Check out this article for more information on carbon neutrality for businesses and how to become carbon neutral with Trace.


Net zero

The term net zero is used when talking about future targets. Net zero refers to the state a business achieves when it has successfully reduced all avoidable greenhouse gas (GHG) emissions and compensated for only the remaining unavoidable emissions with carbon offsets. At this point, the company is contributing no incremental addition of GHG emissions to the atmosphere and can be said to produce net zero emissions.


The Science Based Targets initiative describes net zero for the private sector as the point at which 90 – 95% of a business’s value chain emissions have been eliminated. Carbon offsetting is used only for the remaining residual amount.


Net zero is a long-term strategy that requires a business to decarbonise its operations through efficiency, renewable energy, electrification, and other means. Improvements may need to be made to everything from buildings and machinery to suppliers and waste disposal systems.


Carbon neutral vs net zero

So, what is the difference between net zero vs carbon neutral?


For a start, carbon neutral refers only to carbon emissions, whereas net-zero is concerned with all greenhouse gases, including methane and nitrous oxide. Carbon offsetting can be involved in both targets, as one carbon credit represents one metric tonne of CO2 or CO2 equivalent gas removed, avoided or stored. However, it plays a central part in achieving carbon neutrality and only has a minor role in reaching net zero.


The main difference between the carbon neutral meaning vs net zero is the timeframe and how the target is reached. Carbon neutrality is a short-term state that most companies can achieve almost immediately by measuring their current emissions and using carbon offsets to compensate for them. It does not require any reduction of their emissions.


In comparison, net zero is a long-term goal achieved only when a company has taken action to reduce the majority of its emissions. Offsets are only allowed for the small remainder of unavoidable emissions. Think of carbon neutrality as the first step on the journey to net zero.

Carbon neutral Vs Net Zero graph

Climate neutrality

Climate neutrality is a very similar term to net zero, used when a business, organisation or country has reduced all its GHG emissions to net zero. This should be the goal for everyone if we have any hope of meeting the targets set out by the Paris Agreement and limiting global warming to 1.5°C.


Climate neutrality vs carbon neutrality

So, what is the difference between the terms carbon neutral vs climate neutral? Carbon neutrality refers only to balancing out your carbon emissions using carbon offsetting, with no actual reduction of the amount of carbon you are producing required.


Meanwhile, climate neutrality pertains to reducing all your GHG emissions, from nitrous oxide to hydrofluorocarbons, to net zero. Climate neutrality takes more time, effort and investment to achieve – but we must all strive for it.


Carbon negative or positive (used interchangeably) 

Carbon negative or positive is slightly better than carbon neutral (but not as good as net zero). It means that a business has purchased carbon offsets exceeding its GHG emissions and has begun to remove more carbon from the atmosphere than it emits. At Trace, we consider a company to be carbon negative when it has offset 150% of its emissions. As with carbon neutrality, organisations do not need to reduce their emissions to become carbon negative.


Instead, a business might achieve this by supporting offsetting projects such as reforestation, as forests absorb carbon dioxide in the atmosphere into their biomass, making them carbon sinks. Carbon negative is similar in definition to ‘climate positive’.


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Is carbon neutral the same as net zero?

Carbon neutral and net zero are not the same. Carbon neutral means balancing out your CO2 emissions in the short term through carbon offsetting. Meanwhile, net zero is a longer-term state, achieved when 90 – 95% of all your GHG emissions are eliminated, and only the unavoidable remainder are compensated for with offsets.


What is the difference between net zero and zero carbon?

Net zero means that a business or country is producing net zero greenhouse gas emissions, as it has reduced most of its emissions and offset the small remainder. In contrast, zero carbon means a service or product generates no CO2 emissions. An example might be a wind turbine that generates renewable electricity solely from wind and produces zero carbon emissions.


Does net zero mean no carbon emissions?

A business will reach net zero when it has reduced most of its emissions and compensated for any remaining unavoidable emissions produced with carbon offsets. It does not necessarily mean that the company has stopped emitting any carbon emissions (and is unlikely to mean so, as this is very difficult for most businesses to achieve).


What is the difference between carbon neutral vs carbon negative?

Carbon neutral means that a business or country has calculated its total carbon footprint and balanced 100% of its emissions with offsetting. Carbon negative is the state achieved when a company has offset at least 150% of its emissions by purchasing more carbon offsets than it generates.


Which terminology should I use for my business?

This depends on your overall goals. Before deciding on your terminology, you should first calculate your carbon footprint and consider what would be an ambitious but achievable emissions reduction target for your business.


Whatever you decide, you must be honest and transparent about your choices with your customers and stakeholders. Report your progress and areas that still need improvement to avoid straying into greenwashing territory.


Choosing the right partner to help you on your sustainability journey can be crucial to your success. Contact Trace today, and our experts will help you to calculate your emissions, choose the correct language for your business, and achieve your goals. Together, we can make a difference.

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