Last updated:
May 24, 2024


What is Decarbonisation?

Decarbonisation refers to the process of reducing carbon dioxide emissions by minimising the use of carbon-based fuels and increasing the adoption of renewable energy sources, energy efficiency measures, and other technologies. An essential foundation of decarbonisation is carbon accounting, which involves measuring and documenting the amount of greenhouse gas emissions produced by an organisation. This is a critical first step for establishing reliable emissions baselines from which decarbonisation efforts are measured.

Approaches to Decarbonisation

Effective decarbonisation strategies can be broadly categorised into three main approaches. Each approach plays a critical role in the transition towards a low-carbon economy, and their implementation can vary significantly across different sectors and regions:

  1. Energy Efficiency: This involves improving the efficiency with which energy is used in various sectors such as industrial processes, buildings, and transportation systems. Strategies include upgrading to energy-efficient appliances, improving building insulation, and optimising industrial processes. Energy efficiency not only reduces carbon emissions but also lowers energy costs, making it a highly cost-effective strategy.
  2. Fuel Switching: Transitioning from high-carbon fuels like coal and oil to lower-carbon alternatives is essential for reducing greenhouse gas emissions. This includes switching to natural gas as a less carbon-intensive fossil fuel option, and more importantly, transitioning to renewable energy sources such as solar, wind, and bioenergy. In the transportation sector, this approach is exemplified by the shift from internal combustion engines to electric vehicles, which can be powered by renewable energy.
  3. Technological Innovation: Developing and adopting new technologies that emit less carbon or capture emissions from the atmosphere is crucial for addressing sectors where decarbonisation is more challenging. Innovations include carbon capture and storage (CCS) technologies, which can significantly reduce emissions from industrial processes and power generation. Additionally, advancing battery storage technology is vital for enhancing the viability of renewable energy by addressing variability and storage issues.

Each of these approaches requires tailored strategies depending on sector-specific challenges and opportunities. For instance:

  • In the transport sector, significant reductions can be achieved through both fuel switching (adopting electric vehicles) and improvements in energy efficiency (lighter materials, more efficient engines).
  • In the industrial sector, technological innovation plays a key role in reducing emissions, through advanced manufacturing techniques and materials that lower energy consumption.
  • In the building sector, integrating energy efficiency measures during the design and construction phases is essential, alongside retrofitting existing buildings with better insulation and energy-efficient systems.
Decarbonisation targets set by the world's publicly listed companies

Tips for Implementing Decarbonisation Approaches

  1. Conduct an Energy Audit: Identify areas where energy efficiency can be most effectively increased to reduce emissions.
  2. Invest in Research and Development: Stay at the forefront of technological innovation by investing in R&D and adopting breakthrough technologies early.
  3. Plan for Long-Term Transition: Prepare for a gradual transition from fossil fuels to renewables, including infrastructure changes and investment in new technologies.
  4. Educate and Train Workforce: Ensure that your workforce is educated about new technologies and practices that contribute to decarbonisation.
  5. Pursue Collaborative Efforts: Work with other companies, governments, and non-governmental organisations to leverage collective expertise and resources for more effective decarbonisation.

How to Integrate Carbon Credits into a Decarbonisation Strategy

Carbon credits should be a part of a company's broader decarbonisation strategy, offering a way to neutralise unavoidable emissions and compensate for hard-to-abate emissions. It is critical to use high-quality carbon credits that adhere to recognised standards and are verified by third parties to ensure their effectiveness in mitigating emissions and contributing to environmental sustainability. It is worth noting that carbon credits should not be viewed as a substitute for decarbonisation, but instead, the two should go hand in hand according to the mitigation hierarchy.

The mitigation hierarchy showing the order of avoiding, reducing, and neutralising emissions

Regulatory Landscape + Strategic Frameworks in Europe

The European Union has a robust regulatory framework to guide decarbonisation efforts:

  • EU Emissions Trading System (ETS): This cap-and-trade system sets limits on the total amount of greenhouse gases that can be emitted by covered industries, promoting reductions through a market-driven approach.
  • Corporate Sustainability Reporting Directive (CSRD): This directive extends the duty of large companies to include detailed reporting on their sustainability actions and impacts, fostering greater transparency and accountability.
  • Science Based Targets initiative (SBTi): This collaboration between the CDP, the United Nations Global Compact, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF) helps companies set ambitious carbon reduction targets. These targets are designed to be in alignment with the latest climate science and the goals of the Paris Agreement, underscoring the importance of significant emissions reductions as a precursor to setting net-zero targets.
  • European Green Deal: As part of its strategy to become the first climate-neutral continent, this deal aims to overhaul the EU’s policies for energy, agriculture, economy, and more, driving significant cuts in carbon emissions.
  • Fit for 55: This package aims to bring EU policies in line with the goal to reduce emissions by at least 55% by 2030, including revising several pieces of EU climate legislation, like renewable energy, energy efficiency directives, and setting stricter CO2 standards for cars.

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