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Corporate emission targets are incompatible with global climate goals

  • Date: Tue, May 7, 2024

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Professor Andreas Hoepner from UCD College of Business and colleagues from Utrecht University, Imperial College London and University of North Carolina, argue that any method to derive company-level emissions targets inherently distorts competition in favour of existing companies and penalizes emerging or growing businesses.

Their findings were recently published in Science, "Corporate emissions targets and the neglect of future innovators".

Researchers found that despite their growing importance, companies’ emissions targets are not meaningful indicators to assess the ambition of their decarbonization plans and their alignment with the Paris Agreement.

“Governments or intergovernmental organizations should provide the legal and regulatory frameworks for companies to compete economically while contributing to sustainable innovation and emission reductions,” write the authors.

“To meet international climate goals, it’s well understood that the business sector must decarbonize globally,” said Professor Hoepner, who is also the Vice Principal of Research, Innovation and Impact at UCD College of Business.

The authors explain that many corporations tout that their decarbonization targets and activities are “Paris-aligned.”

However, in the absence of clear scientific methods to determine how much each company should reduce its emissions to meet climate change targets, the groups that validate companies’ voluntary emissions reduction targets often use basic formulas that suggest companies adopt emissions reduction targets equal to the decarbonization rate needed globally or within their sector.

They assume a company’s current emissions and the continued presence and market dominance of existing companies until their specified target date. By allocating the emissions space exclusively among existing companies, this accountability framework distorts competition and could shield well-established and high-polluting companies from market share losses to emerging or expanding competitors by penalizing innovation and the growth of more efficient companies that could have growing emissions in a decarbonizing market.

In the publication, researchers discuss how the widespread adoption of voluntary corporate net-zero targets cannot guarantee rapid global decarbonization and should not substitute for needed regulations.

The authors outline several recommendations for regulating the market and developing useful indicators for measuring compliance and success. Read the article in Science here.

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