To avoid irreversible damage, the world needs to achieve net-zero emissions by 2050. We have committed to achieve net-zero emissions in our operations already by 2030. To achieve this goal, we will "do our best, remove the rest" under our CO2NetZero Programme.
"Doing our best" means we will double down on our efforts to reduce emissions. Since 2003, we have already managed to cut our emissions per employee by more than half. Under our CO2NetZero Programme, a special focus lies on our air travel emissions, which are currently responsible for two thirds of our operational carbon footprint. We have set ourselves the company-wide target of reducing our flight emissions by 30% in 2021, relative to the level of 2018, and will set a new, ambitious target for the post-COVID period.
"Removing the rest" means we will support carbon removal projects to compensate any emissions we cannot yet avoid. Carbon removal involves a set of technologies or practices that result in negative emissions, ie, they take CO2 back from the atmosphere and store it permanently. The list of carbon removal methods ranges from nature-based solutions such as afforestation or soil carbon sequestration, to technical solutions such as direct air capture or mineralisation.
From carbon-neutral to net-zero operations
Since 2003, we have been compensating all emissions we could not reduce ourselves via emission reduction certificates, commonly known as carbon offsets. This has allowed us to claim "carbon-neutral" operations. By buying carbon offsets we pay others to reduce their emissions in our place. Our emissions, however, still enter the atmosphere and remain there, thus contributing to global warming. Therefore, conventional carbon offsetting is incompatible with a net-zero emissions target.
Boosting the carbon removal industry
To claim net-zero operations, going forward we will start compensating our unavoided emissions through carbon removal certificates. This comes at a price, as the carbon removal industry is still at a very early stage. The higher compensation cost provides the perfect incentive to reduce as much of our emissions as possible in the first place. Furthermore, for the world to be at net-zero emissions by 2050, climate scientists predict a need for billions of tonnes of negative emissions. Swiss Re's early engagement will help the nascent carbon removal industry to develop on time and deploy its solutions at scale.
Setting a stringent price on carbon
To cover the first-mover price for carbon removal certificates, we are stepping up our internal carbon levy from less than USD 10 per tonne CO2 today to USD 100 per tonne CO2 in 2021. Swiss Re is the first multi-national company with a triple-digit real internal carbon price on both its direct emissions and indirect operational emissions (such as business travel).¹ A real carbon price – unlike the more often used shadow carbon price – impacts budgets and is therefore particularly effective in fostering emission reductions. Swiss Re's new "Carbon Steering Levy" will gradually increase to USD 200 per tonne of CO2 by 2030. The 10-year funding scheme will allow us to enter long-term offtaking agreements with carbon removal service providers, which sends a particularly strong signal to the market:
- It incentivises emission reductions, in particular through less air travelling, helping us reach our target of reducing our flight emissions by 30% in 2021 compared to 2018 levels.
- It signals to our stakeholders that Swiss Re is a credible partner when it comes to addressing climate risks.
- It prepares our business for the expected tightening of carbon pricing policies worldwide.
Walking the net-zero talk
Already last year in May, we seized the opportunity to participate in the world's first auction for carbon removal certificates, run by the recently formed Finnish start-up Puro.earth. Only small volumes of carbon removal certificates were traded during this inaugural auction, as the participants primarily wanted to test the new marketplace initiative. We secured a small batch (100 tonnes) of carbon removal certificates from a biochar project in Tampere, Finland. Biochar locks away the CO2 that plants have removed from the air to grow their biomass. Mixed with soil, biochar endures for hundreds of years and improves soil quality by retaining moisture and nutrients.
¹Based on Swiss Re's analysis of CDP Climate Change Questionnaires submitted for the 2020 disclosure cycle. A few corporates use a shadow internal carbon price at the triple-digit level for certain investment decisions. A shadow carbon price – unlike a real carbon price – is fictional and has no direct impact on the balance sheet.