Building a Bridge Toward the Net Zero 2050 Transition Framework

Achieving net zero greenhouse gas (GHG) emissions by 2050 is now a global priority. Governments, corporations, and international organizations have set ambitious targets aligned with the Paris Agreement. However, the reality on the ground—especially in developing economies—shows that the journey to net zero is neither straightforward nor immediate.

Many industries in Asia, Africa, and Latin America remain structurally dependent on natural gas for grid electricity, captive power generation, and industrial boilers. Despite global pressure to decarbonize, these economies face persistent barriers: unreliable electrical grids, limited rooftop and land availability for solar projects, weak biomass supply chains, and high costs of capital that slow adoption of new technologies.

Net Zero 2050 Transition Framework

This paper introduces the Transitional Emissions-Preference Scheme (TEPS), a 10-year structured mechanism designed to act as a Net Zero 2050 transition framework. TEPS enables industries to neutralize their carbon footprint by using Renewable Energy Certificates (REC-E) for grid and captive power and Renewable Thermal Certificates (REC-T/RTC) for process heat. By doing so, companies can claim credible neutrality today while following progressive rules that mandate real abatement and eventual electrification.

TEPS is more than a temporary solution—it is a bridge framework that aligns with the GHG Protocol, safeguards environmental integrity, and ensures industries can remain competitive in global supply chains while moving steadily toward a resilient, zero-carbon future by 2050.

Objectives of the Transitional Emissions-Preference Scheme (TEPS)

The Transitional Emissions-Preference Scheme (TEPS) is designed to help industries in developing economies stay competitive today while preparing for the long-term Net Zero 2050 transition framework. Its objectives balance immediate needs with future sustainability goals:

1. Ensure Immediate Carbon Neutrality
   TEPS allows companies to achieve credible neutrality right now by using renewable energy and thermal certificates. This protects export competitiveness as global buyers increasingly demand low-carbon supply chains.
2. Bridge Today’s Infrastructure and Technology Gaps
   Many industries cannot yet fully switch to electrification or low-carbon fuels because of weak infrastructure and high capital costs. TEPS provides a structured pathway that supports them until reliable technologies and infrastructure are in place.
3. Promote Gradual but Mandatory Transition
   Unlike voluntary offsets, TEPS includes progressive rules that steadily reduce reliance on certificates and push industries toward real abatement and electrification over a 10-year timeline.
4. Protect Environmental Integrity
   All certificates under TEPS must comply with the GHG Protocol’s strict quality criteria, ensuring transparency, traceability, and genuine impact—not greenwashing.
5. Accelerate Industry Mindset Shift
   Beyond technical compliance, TEPS encourages industries, policymakers, and investors to think differently—fostering a culture of long-term sustainability and innovation aligned with the global Net Zero 2050 vision.

In short, TEPS combines immediate action with future accountability, making it both a survival tool for industries today and a roadmap for decarbonization tomorrow.

Scope of Application of TEPS

The Transitional Emissions-Preference Scheme (TEPS) has been designed to target the most carbon-intensive areas of industrial energy use. By focusing on these categories, TEPS provides a practical pathway for businesses to align with the Net Zero 2050 transition framework without sacrificing operational stability or competitiveness.

1. Grid Electricity (Scope 2 Emissions)
   In many developing economies, grid electricity remains heavily dependent on fossil fuels, making it a major source of Scope 2 emissions. Under TEPS, companies can achieve neutrality by retiring Renewable Energy Certificates (REC-E) that represent an equivalent amount of renewable electricity generated elsewhere. This mechanism ensures that firms can continue to rely on grid power while still meeting sustainability commitments. Importantly, the use of REC-E is aligned with the GHG Protocol’s quality criteria, ensuring that credits are transparent, traceable, and verifiable.
2. Captive Natural Gas Generators (Scope 1 Emissions)
   Unstable grids often push industries to install captive natural gas generators to guarantee reliable power. While necessary for business continuity, these generators create significant Scope 1 emissions. TEPS recognizes this challenge and allows companies to neutralize such emissions with REC-E during the transition phase. However, the scheme includes strict requirements: energy output must be accurately metered, certificates must match the verified generation volume, and disclosure must clearly state neutrality under TEPS transitional rules. This ensures credibility while giving businesses breathing room to invest in long-term electrification.
3. Boilers and Process Heat (Scope 1 Emissions)
   Industrial boilers—essential for producing steam and heat—are another major source of emissions, particularly when powered by natural gas. Alternatives like biomass or biogas often face barriers of cost, quality, and supply chain reliability. TEPS provides a transitional pathway by allowing companies to retire Renewable Thermal Certificates (REC-T/RTC), which represent renewable thermal energy sources such as solar thermal, biogas, waste heat recovery, or advanced biomass systems. The scheme progressively reduces the share of emissions that can be neutralized with certificates, pushing industries toward efficiency upgrades, boiler conversions, and eventually electrification.

By addressing these three categories—grid electricity, captive power, and boilers/process heat—TEPS covers the bulk of industrial emissions in developing economies. It ensures that companies are not left behind in the global sustainability race, while laying the foundation for a credible and progressive Net Zero 2050 transition framework.

Core Accounting Mechanics of TEPS

For the Transitional Emissions-Preference Scheme (TEPS) to serve as a reliable Net Zero 2050 transition framework, it must be backed by strong accounting rules. These rules ensure transparency, prevent double-counting, and maintain credibility with international buyers, regulators, and investors. TEPS accounting covers three main areas: grid electricity, captive natural gas generators, and industrial boilers/process heat.

1. Grid Electricity (Scope 2 Emissions)

Electricity from the national grid is one of the largest contributors to industrial emissions, especially in regions where grids are dominated by fossil fuels. Under TEPS, companies must report both:

• Location-based emissions: Calculated using the grid’s emission factor.
• Market-based emissions: Adjusted through the retirement of Renewable Energy Certificates (REC-E).

By retiring REC-E, businesses can claim renewable power use even if the grid itself is carbon-intensive. To safeguard integrity, eligible REC-E must meet the GHG Protocol Scope-2 Quality Criteria, which requires:

• Uniqueness (no double-counting),
• Reliable tracking and verification,
• Geographic and temporal alignment with energy consumption.

This ensures that when a company says it is using renewable electricity, the claim is credible and internationally recognized.

2. Captive Natural Gas Generators (Scope 1 Emissions)

In many developing economies, unreliable grid infrastructure forces industries to operate captive natural gas (NG) generators. While essential for energy security, these units produce significant Scope 1 emissions.

TEPS provides a transitional solution by allowing these emissions to be neutralized through REC-E retirements. To maintain credibility, companies must comply with three key requirements:

1. Accurate Measurement: Generator output (kWh) must be precisely metered and independently verified.
2. Matching Retirement: The number of REC-E retired must directly match the verified generation volume. Over time, temporal accuracy must improve—from annual matching in the early years to monthly precision by Year 10.
3. Clear Disclosure: Companies must explicitly label these offsets in sustainability reports as “Scope-1 captive generation neutralized via REC-E under TEPS transitional rules.”

This ensures transparency and signals to stakeholders that neutrality is transitional, not permanent.

3. Boilers and Process Heat (Scope 1 Emissions)

Industrial boilers are another major source of emissions, as they typically run on natural gas for producing steam and heat. Since full electrification of boilers is not immediately practical, TEPS allows companies to use Renewable Thermal Certificates (REC-T/RTC) to neutralize emissions from thermal energy.

To qualify, REC-T/RTC must be:

• Serialized and fuel-specific,
• Vintage-stamped to prove time alignment,
• Metered at source,
• Verified by a trusted third party.

TEPS also sets progressive transitional rules for boilers:

• Years 1–3: Up to 100% of boiler emissions can be neutralized using REC-T/RTC.
• Years 4–6: Only 75% may be neutralized with certificates; the remaining 25% must come from efficiency upgrades or partial on-site low-carbon heat.
• Years 7–8: The cap falls to 50%, with firms required to show pre-FEED (Front-End Engineering Design) studies for electrification or fuel conversion.
• Years 9–10: Only 25% of emissions may be covered with certificates; firms must commission electric boilers, industrial heat pumps, or advanced biomass systems.

Integrity safeguards are built in: CH₄ and N₂O emissions remain reportable under Scope 1, while biogenic CO₂ must be reported separately for full transparency. Companies must also disclose natural gas usage, emission factors, certificate retirements (with IDs), and progress toward mandated milestones.

By combining these accounting mechanics, TEPS ensures that emission reductions are measurable, verifiable, and transparent, while also pushing industries toward real decarbonization. This balance of flexibility and accountability is what makes TEPS a credible bridge framework for Net Zero 2050.

Integrity Guardrails

For TEPS to be credible as a Net Zero 2050 transition framework, it must avoid the pitfalls of weak offsets or greenwashing. To ensure transparency and environmental integrity, TEPS includes strict guardrails that companies must follow:

1. Temporal Matching

• Rule: The timing of certificate retirements must align with actual energy use.
• Requirement:
  • Years 1–3: Annual matching is acceptable.
  • Years 4–6: Must improve to quarterly precision.
  • Years 7–10: Monthly matching is mandatory.
• Why it matters: Prevents companies from claiming renewable use in a different period than when fossil fuels were consumed, ensuring accurate climate accounting.

2. Geographic Hierarchy

• Rule: Renewable certificates should be sourced as close as possible to the place of energy use.
• Requirement:
  • First preference: Domestic certificates.
  • Second preference: Regional certificates.
  • Third preference: Global certificates, but with discounting factors to reflect weaker local impact.
• Why it matters: Encourages local renewable markets and ensures real decarbonization benefits within the same grid or energy system.

3. Transparency and Public Tracking

• Rule: All certificate retirements must be recorded in a public registry.
• Requirement: Retirements must be linked to specific product batches or reporting periods.
• Why it matters: Buyers and stakeholders can verify claims, preventing double-counting or hidden offsets.

4. Distinct Labeling of TEPS-Neutral Claims

• Rule: Products or companies using TEPS must differentiate their claims from permanent abatement.
• Requirement: Sustainability reports and product labels must clearly state: “Neutralized under TEPS transitional rules.”
• Why it matters: Ensures consumers and investors know neutrality is transitional, not permanent, maintaining credibility and trust.

5. Sunset Clause (10-Year Limit)

• Rule: TEPS is strictly time-bound. All transitional arrangements expire after 10 years.
• Requirement: Companies must fully shift to electrification, efficiency, or low-carbon fuels by the end of the TEPS period.
• Why it matters: Prevents indefinite reliance on certificates and guarantees that TEPS drives real decarbonization rather than becoming a permanent offset system.

Together, these guardrails guarantee that TEPS is not just a paper-based solution, but a robust and transparent mechanism that maintains integrity while guiding industries along the Net Zero 2050 transition framework.

Ratcheting Timeline

The Transitional Emissions-Preference Scheme (TEPS) is designed as a 10-year journey. It begins with flexibility, allowing industries to achieve neutrality immediately, but progressively reduces reliance on certificates. By the end of the decade, industries are expected to adopt real decarbonization solutions such as electrification, renewable heat, and efficiency upgrades.

Here is the year-by-year breakdown:

Years 1–3: Immediate Neutrality Phase

• What’s allowed: Companies can neutralize up to 100% of their emissions using REC-E and REC-T/RTC certificates.
• Focus: Build momentum, encourage early adoption, and allow industries to meet buyer requirements for carbon-neutral products.
• Why it matters: Provides breathing room for industries in developing economies to maintain competitiveness while planning long-term abatement investments.

Years 4–6: Transition and Partial Abatement

• What’s allowed: Only 75% of emissions can be neutralized using certificates. At least 25% must come from real actions such as:
  • Energy efficiency improvements,
  • Partial on-site renewable integration,
  • Small-scale boiler conversions.
• Focus: Push industries to begin investing in physical abatement measures rather than relying solely on certificates.
• Why it matters: Signals that TEPS is a bridge, not a permanent crutch, and drives early infrastructure upgrades.

Years 7–8: Deep Transition and Planning for Electrification

• What’s allowed: Only 50% of emissions can be neutralized using certificates.
• New requirement: Companies must demonstrate pre-FEED (Front-End Engineering Design) studies or equivalent planning for electrification, boiler conversion, or adoption of low-carbon fuels.
• Focus: Ensure industries are actively preparing to implement large-scale decarbonization technologies.
• Why it matters: Moves the focus from “planning someday” to “engineering now,” creating accountability.

Years 9–10: Final Shift to Real Abatement

• What’s allowed: Only 25% of emissions can be covered by certificates.
• Mandatory requirement: Firms must commission real abatement systems, such as:
  • Electric boilers,
  • Industrial heat pumps,
  • Large-scale biomass/biogas boilers,
  • Advanced waste heat recovery.
• Focus: Ensure industries physically reduce emissions rather than relying on transitional tools.
• Why it matters: Creates a hard stop for transitional neutrality, guaranteeing that TEPS ends with real transformation, not perpetual offsets.

Post-Year 10: Beyond TEPS

• Requirement: TEPS expires after 10 years (sunset clause).
• Expectation: All companies must operate on low-carbon technologies and electrified systems, in full alignment with the Net Zero 2050 transition framework.

👉 In simple terms, the ratcheting timeline ensures industries start with flexibility but finish with accountability. It transforms TEPS from a short-term survival tool into a decade-long catalyst for structural decarbonization.

Manufacturer Responsibilities

For TEPS to work effectively, industries must take clear and measurable steps. Manufacturers are not only beneficiaries of the scheme but also key actors responsible for driving the transition. Their responsibilities under TEPS can be grouped into five major areas:

✅ 1. Develop a 10-Year Transition Roadmap

• What to do: Each manufacturer must create a clear decarbonization roadmap that spans the full 10-year TEPS timeline.
• Key elements:
  • Targets for energy efficiency improvements.
  • Plans for electrification of boilers and process heat.
  • Milestones for renewable energy integration.
• Why it matters: A roadmap ensures industries are not only compliant but also strategically aligned with the Net Zero 2050 transition framework, attracting investment and global buyers.

✅ 2. Annual Disclosure of Emissions and Certificates

• What to do: Publish a yearly Scope 1–3 emissions inventory, alongside detailed reporting of REC-E and REC-T/RTC retirements.
• Key elements:
  • Certificate IDs and retirement records.
  • Energy consumption data for grid, captive power, and boilers.
  • Progress against TEPS milestones.
• Why it matters: Transparency builds trust with buyers, investors, and regulators while ensuring accountability across supply chains.

✅ 3. Invest in MRV (Monitoring, Reporting, Verification) Infrastructure

• What to do: Install and maintain proper monitoring systems to ensure accurate data collection.
• Key tools:
  • Electricity meters for grid and captive generators.
  • Steam and enthalpy logs for boilers.
  • Gas consumption records.
  • Continuous Emissions Monitoring Systems (CEMS) for large-scale boilers.
• Why it matters: Reliable MRV systems prevent underreporting, support audits, and provide credible data for sustainability claims.

✅ 4. Assurance and Independent Verification

• What to do: Engage third-party auditors to provide independent verification of emissions data and certificate retirements.
• Timeline:
  • By Year 3: Limited assurance is required.
  • By Year 7: Reasonable assurance must be in place.
• Why it matters: Independent verification prevents manipulation, strengthens credibility, and aligns with international reporting standards such as the GHG Protocol.

✅ 5. Prepare for Final Transition Beyond TEPS

• What to do: Manufacturers must plan for the post-TEPS phase, when transitional neutrality is no longer available.
• Key focus areas:
  • Commissioning of electric boilers or industrial heat pumps.
  • Long-term contracts for renewable electricity and thermal energy.
  • Collaboration with governments and financiers to access low-cost capital for clean energy investments.
• Why it matters: TEPS is only a 10-year bridge. Companies that fail to prepare risk losing access to export markets where buyers demand fully decarbonized products.

👉 In short, manufacturer responsibilities under TEPS are not limited to compliance. They form the backbone of industrial transformation, ensuring companies remain globally competitive while steadily progressing toward the Net Zero 2050 transition framework.

Government & System Operator Role

While industries carry the responsibility of implementing TEPS at the operational level, governments and system operators must create the enabling environment that makes the transition possible. Without strong policy support, robust infrastructure, and financial tools, industries will struggle to deliver on their commitments.

Here are the key roles governments and system operators must play:

🏗️ 1. Strengthen Grid Infrastructure

• Action: Invest in modernizing national grids to improve reliability and capacity for renewable integration.
• Why it matters: Many industries still rely on captive natural gas generators because of unstable grids. A stronger grid allows industries to shift away from captive fossil-based power toward clean electrification. This is essential for the Net Zero 2050 transition framework.

📊 2. Develop a Domestic REC-T Registry

• Action: Establish a national Renewable Thermal Certificate (REC-T) registry, compatible with international tracking systems.
• Why it matters: Transparent and standardized registries ensure credibility of thermal energy claims and allow local certificates to be traded in global carbon markets. This strengthens both domestic industry competitiveness and foreign investor confidence.

💰 3. Provide Financial Tools and Incentives

• Action: Create mechanisms that reduce financing risks for industries making low-carbon investments. This includes:
  • Foreign exchange (FX) hedging to protect against currency volatility,
  • Concessional loans for renewable and electrification projects,
  • Credit guarantees to unlock private capital.
• Why it matters: High cost of capital is one of the biggest barriers in developing economies. Financial tools accelerate industrial decarbonization while keeping firms competitive in global supply chains.

🌍 4. Enforce Air Quality and Renewable Fuel Standards

• Action: Strengthen environmental regulations that set minimum standards for air emissions and renewable thermal fuels.
• Why it matters: Aligning TEPS with local air quality goals ensures that industrial decarbonization is not only about global carbon targets but also about local public health and environmental sustainability.

🤝 5. Build Industry–Government Partnerships

• Action: Governments should collaborate with manufacturers, utilities, and financiers to co-create a Transition Investment Fund.
• Why it matters: Shared responsibility ensures that industries can access both policy support and capital while governments secure compliance with their nationally determined contributions (NDCs) under the Paris Agreement.

👉 In summary, governments and system operators are the backbone enablers of TEPS. Their actions ensure that industries are not working in isolation but are supported by reliable grids, transparent registries, fair financing, and strong policy frameworks. Together, these measures create the infrastructure for a successful Net Zero 2050 transition framework.

Buyer & Importer Role

While industries and governments carry much of the responsibility for implementing TEPS, global buyers and importers also play a crucial role. Their purchasing power and procurement standards can accelerate adoption, ensuring that transitional neutrality under TEPS is recognized and valued in international supply chains.

Here are the key responsibilities for buyers and importers:

🛒 1. Accept TEPS-Compliant Claims as Transitional Neutrality

• Action: Buyers should formally recognize TEPS claims as a valid transitional carbon neutrality mechanism for a 10-year period.
• Why it matters: Many developing-economy exporters risk exclusion from global supply chains if buyers insist on full abatement today. Accepting TEPS claims keeps them competitive while ensuring a structured move toward Net Zero 2050.

🏷️ 2. Require Clear and Transparent Labeling

• Action: Importers should insist that TEPS-neutral products carry distinct labeling such as:
  “Neutralized under TEPS transitional rules – part of the Net Zero 2050 transition framework.”
• Why it matters: This maintains credibility and transparency with end consumers, ensuring they understand the difference between transitional neutrality and permanent abatement.

💸 3. Support TEPS Through Procurement Incentives

• Action: Offer preferential procurement policies or pricing advantages to suppliers who comply with TEPS.
• Why it matters: Financial and commercial incentives reward early movers, encouraging wider participation and building momentum toward sustainable supply chains.

🤝 4. Co-Finance Transition Investments

• Action: Collaborate with industries and governments to co-fund a Transition Investment Fund. This could include low-interest loans, blended finance models, or risk-sharing mechanisms.
• Why it matters: Many manufacturers lack the capital to invest in electrification or boiler conversion. By sharing responsibility, buyers help ensure that suppliers can meet long-term decarbonization commitments.

🔍 5. Verify and Audit Supplier Progress

• Action: Establish independent verification systems to confirm that TEPS claims are accurate. This includes reviewing certificate retirements, emissions disclosures, and progress against milestones.
• Why it matters: Buyers must ensure that suppliers are not just purchasing certificates indefinitely, but are genuinely progressing toward real abatement under the Net Zero 2050 framework.

👉 In short, buyers and importers are not passive recipients—they are active enablers of TEPS. By recognizing transitional neutrality, enforcing transparency, providing incentives, and co-investing in transformation, they help create a globally aligned supply chain pathway to Net Zero 2050.

Conclusion

Achieving Net Zero 2050 is one of the most ambitious global goals of our time. Yet for many developing economies, the pathway is filled with barriers: unreliable grids, dependence on natural gas, high financing costs, and limited renewable supply chains. Without a pragmatic bridge, industries risk losing competitiveness in global markets and failing to meet rising sustainability expectations.

The Transitional Emissions-Preference Scheme (TEPS) offers that bridge. By enabling immediate neutrality through renewable certificates while enforcing a 10-year ratcheting timeline, TEPS ensures that industries can remain competitive today while steadily progressing toward real abatement, electrification, and renewable integration.

Unlike traditional offset systems, TEPS is designed with integrity guardrails, progressive limits, and strict disclosure requirements, ensuring it cannot become a permanent crutch. Instead, it acts as a time-bound catalyst for transformation.

For manufacturers, TEPS provides a survival tool in the short term and a structured pathway toward long-term competitiveness. For governments, it offers a framework to align industrial policy with climate goals while building stronger infrastructure. For global buyers and importers, TEPS ensures that supply chains remain resilient, transparent, and aligned with international climate commitments.

Ultimately, TEPS is not just a compliance tool. It is a strategic framework for industrial decarbonization, bridging today’s energy realities with tomorrow’s net-zero ambitions. By adopting and scaling TEPS, industries across developing economies can safeguard their place in global supply chains while contributing meaningfully to the Net Zero 2050 transition framework.

Written by: Md. Rawnak Hossain

Sustainability Consultant

Email: [email protected]