Achieving Net Zero: The Crucial Role of Climate Technology

Net zero should not be unfamiliar territory, particularly for chief sustainability officers, general counsels, and boards of directors. Failing to consider net zero emissions can have significant and multifaceted impacts on an organization’s performance, including regulatory and compliance risk, brand reputation, and financial and investment risk. Companies that overlook climate risks may struggle to attract investment, potentially facing higher capital costs or even divestment. Additionally, sustainability-linked financing, such as green bonds and loans with favorable terms, may be out of reach without a clear net zero strategy. Therefore, companies can no longer ignore this issue. Achieving net zero emissions requires a concerted effort, with climate technology playing a central role. In this article, we explore how climate technology is pivotal in driving forward this initiative.

Understanding Net Zero

“Net zero” refers to the balance between the amount of greenhouse gases (GHGs) emitted into the atmosphere and the amount removed from it. Achieving net zero means that any human-caused emissions (anthropogenic emissions) are counterbalanced by an equivalent amount of GHG removal.

Currently, there isn’t a single standardized formula for calculating net zero, as it can vary depending on the context, the scope of emissions being considered, and the methodologies used for measurement and accounting. Generally, the steps involve quantifying all GHG emissions from various sources within a defined boundary, including direct emissions from activities like energy production, transportation, industry, and agriculture, as well as indirect emissions associated with purchased electricity and other goods and services. Additionally, any GHG removals or sinks, such as carbon uptake by forests, oceans, soils, and technological solutions like carbon capture and storage, are identified and quantified. The net balance is then calculated by subtracting total emissions from total removals, determining whether an entity is contributing to climate change (positive net balance) or offsetting emissions (negative net balance).

The Role of Climate Technology in Achieving Net Zero

Technology is critical in assisting companies in achieving net zero, frequently referred to as climate technology. Here, we highlight five types of climate technology that can help achieve the net zero objective:

1. Renewable Energy Technology: Transitioning from traditional energy sources to renewable energy sources such as solar, wind, hydro, and geothermal power is essential for reducing carbon emissions. These renewable energy sources offer several advantages over traditional fossil fuels in the context of achieving net zero emissions. Unlike fossil fuels, renewable energy sources produce little to no greenhouse gas emissions during operation, thereby significantly reducing carbon footprints. Most importantly, renewable energy technologies are inherently sustainable and abundant, providing a reliable and long-term solution for powering communities and industries without contributing to climate change.

2. Energy Efficient Technology: Energy efficient technology focuses on optimizing energy use to achieve the same or higher levels of performance while consuming less energy. This includes advanced appliances and lighting systems like LED bulbs, high-efficiency HVAC systems, and better insulation materials for buildings. By reducing energy consumption, these technologies decrease the demand for electricity generation, which often relies on fossil fuels, thus lowering greenhouse gas emissions. Compared to conventional energy technologies, which typically operate with higher energy waste and inefficiencies, energy efficient technologies enable significant reductions in overall energy use and emissions.

3. Smart Grid Technology: Smart grid technology enhances the traditional electrical grid by incorporating digital communication, advanced sensors, and automation systems to improve the efficiency, reliability, and sustainability of electricity distribution. Unlike the conventional grid, which is largely one-way and lacks real-time monitoring, smart grids enable two-way communication between utilities and consumers, allowing for dynamic management of electricity flows. This includes real-time monitoring of energy usage, automatic rerouting of power in case of outages, and integration of renewable energy sources like solar and wind into the grid. Smart grids facilitate demand response programs where consumers adjust their usage during peak times, reducing the strain on the grid and lowering emissions. By improving the efficiency and flexibility of the electricity network, smart grids play a critical role in achieving net zero emissions, enabling a more resilient, sustainable, and cleaner energy system compared to traditional grid infrastructure.

4. Carbon Capture, Utilization, and Storage (CCUS): CCUS is a set of technologies designed to capture carbon dioxide (CO2) emissions from industrial processes and power generation, prevent it from entering the atmosphere, and either utilize it in various applications or store it underground. The process begins with capturing CO2 at its source, such as a factory or power plant, using chemical solvents or other methods. The captured CO2 is then compressed and transported, typically via pipelines, to a utilization site where it can be used in products like concrete or biofuels, or to a storage site where it is injected into deep geological formations, such as depleted oil and gas fields, for long-term storage. This technology is particularly suitable for heavy industries that are difficult to decarbonize, providing a means to significantly reduce their emissions while maintaining operational viability.

5. Circular Economy Technology: Circular economy technology revolves around designing products and systems to minimize waste, extend product lifecycles, and regenerate natural systems. This includes advanced recycling processes that break down materials into their basic components for reuse, biodegradable materials that reduce waste, and industrial symbiosis where waste from one process becomes input for another. Companies can employ circular economy principles by designing products for durability, reparability, and recyclability, implementing take-back schemes, and optimizing resource use through digital platforms that track material flows. This approach helps companies achieve net zero by reducing the demand for virgin materials, transforming waste into valuable resources, thereby closing the loop and significantly cutting down the overall carbon footprint compared to conventional, linear business models.

Conclusion

Net zero has swiftly transitioned from an optional consideration to an imperative for every company. Climate technological advancements are pivotal in enabling companies to reach this goal, making it an aspect that demands universal attention. Harnessing the potential of innovation and technology, we can overhaul our energy systems, industries, and societies, forging a sustainable and resilient future.

If you have any needs related to ESG, especially in the technology field, do not hesitate to reach out to our legal professionals who specialize in technology law and related areas. Our team is well-equipped to guide you through the complexities of sustainability initiatives, helping you leverage climate technology to achieve your net zero goals while ensuring compliance and maximizing your competitive advantage. Let us partner with you in creating a sustainable and resilient future for your organization.

About the authors

Ong Johnson
Partner
Head of Technology Practice Group
Transactions and Dispute Resolution, Technology,
Media & Telecommunications, Intellectual Property,
Fintech, Privacy and Cybersecurity
johnson.ong@hhq.com.my

Lo Khai Yi
Partner
Co-Head of Technology Practice Group
Technology, Media & Telecommunications, Intellectual
Property, Corporate/M&A, Projects and Infrastructure,
Privacy and Cybersecurity
ky.lo@hhq.com.my.

Tan Zhen Chao
Associate
Real Estate, Project Development, Strata Management, Dispute Resolution
zctan@hhq.com.my.