The Science Based Targets initiative (SBTi) recently released findings from its review of carbon credit effectiveness, marking a pivotal moment in the ongoing debate over voluntary corporate climate commitments.
The global referee for corporate climate targets is reconsidering the role of carbon credits in emissions reduction plans, potentially reshaping how businesses approach their net-zero goals.
SBTi, which has validated climate targets for over 5,000 companies worldwide, found that many carbon credits are largely ineffective at reducing emissions. However, the organisation stopped short of ruling them out entirely, stating that more research is needed before drawing firm conclusions.
This nuanced stance is part of SBTi’s broader review of its Corporate Net-Zero Standard, which has thrust the initiative into the centre of a contentious global conversation about the legitimacy of carbon credits in corporate sustainability strategies.
“Today’s announcement marks a key step in the revision process for the Corporate Net-Zero Standard,” said Sue Jenny Ehr, Interim CEO of SBTi. “It is important that the SBTi conducts a comprehensive process to revise the Standard to help companies take the lead on climate action and drive down emissions.”
The review, which included a systematic assessment of peer-reviewed academic literature, yielded mixed results. While some trends and insights emerged, SBTi concluded that the findings were insufficient to draw robust conclusions about the effectiveness of carbon credits as a substitute for direct emissions reductions.
This cautious approach reflects the complex landscape of carbon offsetting. Critics argue that credits allow companies to “buy their way out” of making fundamental changes to their operations. At the same time, proponents contend they’re a necessary tool for financing global emissions reductions, particularly in hard-to-abate sectors.
Alberto Carrillo Pineda, SBTi’s Chief Technical Officer, emphasised that direct decarbonisation must remain the priority for corporate climate action. However, he also highlighted the need for a more sophisticated approach to assessing three emissions—those occurring in a company’s value chain but outside its direct control.
“The SBTi believes that direct decarbonisation must remain the priority for corporate climate action,” Pineda stated. “We look forward to the extensive public consultation on the draft Corporate Net-Zero Standard.”
The initiative’s findings come at a crucial time for corporate climate action. With increasing pressure from investors, regulators, and consumers, businesses are scrambling to demonstrate meaningful progress towards net-zero goals. The role of carbon credits in these strategies has been a point of contention, with some viewing them as a vital bridge to a low-carbon future and others dismissing them as greenwashing.
SBTi’s review explored several scenarios for how environmental attribute certificates, including carbon credits, might be used in science-based target-setting contexts. Notably, none of these scenarios included offsetting emissions – a practice where companies buy credits instead of reducing emissions within their value chains.
Instead, the scenarios outlined potential credit uses in providing evidence of decarbonisation within the value chain, counterbalancing residual emissions, or covering emissions excluded from current target boundaries. This approach could incentivise additional finance for climate action without diverting resources from emissions reduction within businesses.
The organisation’s careful positioning reflects the high stakes involved. As the leading arbiter of corporate climate commitments, SBTi’s decisions have far-reaching implications for global business practices and the trajectory of corporate climate action.
SBTi plans to release a draft of its revised Corporate Net-Zero Standard for public consultation towards the end of Q4 2024. This will provide an opportunity for input from civil society, business, and government stakeholders, ensuring a broad range of perspectives are considered in the final guidelines.
The ongoing review process underscores the evolving nature of climate action strategies and the need for continual reassessment based on the latest scientific evidence. As companies grapple with the challenge of decarbonisation, particularly in their complex supply chains, the role of carbon credits remains a crucial point of discussion.
While SBTi’s findings don’t definitively answer the place of carbon credits in corporate climate strategies, they signal a willingness to consider their potential role under specific circumstances. This nuanced approach may pave the way for more sophisticated and effective corporate climate commitments in the future.
As the global community races to limit warming to 1.5°C above pre-industrial levels, the outcome of SBTi’s standard revision process will significantly shape corporate climate action for years to come. With the draft standard expected later this year, all eyes will be on SBTi to see how it navigates the complex interplay between scientific rigour, practical implementation, and the urgent need for climate action.
