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IETA Releases Guidelines for High Integrity Use of Carbon Credits.

Read more in the April 26 edition of Invert Insights.

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At its annual European Climate Summit, IETA unveiled its Guidelines for High Integrity Use of Carbon Credits, which set out clear, unambiguous, and robust guidance on how corporate buyers should consider their use of carbon credits to progress towards the goals of the Paris Agreement.

IETA has outlined 6 core guidelines for companies considering carbon credits to meet their climate goals. These guidelines help define use cases for carbon credits in decarbonization plans but don’t specifically address how to set a net zero pathway, how to quantify a company’s Scope emissions, or how to make appropriate claims.

These guidelines, designed to help companies globally take responsibility and credibly incorporate high integrity carbon credits into their border climate strategy, stress that carbon credits should be used in line with the “mitigation hierarchy”, meaning companies should first look to reduce emissions at source before investing in carbon offsets to only tackle emissions that cannot be abated.

IETA’s Guidelines for High Integrity Use of Carbon Credits include:

(1) Demonstrate support for the Paris Agreement Goals 

Companies should see this as a collective effort to work towards global climate goals and should include setting a decarbonization pathway aligned with net zero, meeting interim targets (including compensating for unabated emissions), and contributing as much as possible to the decarbonization of the global economy.

(2) Quantify and publicly disclose Scope 1, 2 and 3 emissions profiles

Companies should quantify their Scope 1, 2, and 3 emissions in line with internationally recognized standards and regularly disclose them publicly and transparently with annual updates (or as required by established regulations).

(3) Establish a net zero decarbonization pathway and near-term targets

Companies must also take near-term action to reduce their absolute Scope 1, 2, and 3 emissions as part of global decarbonization efforts. Interim targets should be ambitious but rooted in pragmatism as ‘empty’ targets that a company has no intention or ability to meet are misleading and considered greenwashing. Further, setting an internal carbon price to support emission reduction activities and the associated business case is key as it can help to set a price benchmark for developing a portfolio of high-quality credits for compensation use.

(4) Use carbon credits in line with the mitigation hierarchy

Companies should always work to avoid emissions first and then reduce and minimize emissions by switching to less intensive activities or minimizing the impact on the environment wherever possible. Only then should companies consider the use of carbon credits to offset those emissions that otherwise could not be abated. IETA also highlights that while Scope 3 emissions can be more difficult to measure and control, organizations still have a responsibility to first influence, support, and collaborate with their value chain to mitigate and reduce where possible. 

(5) Ensure that only high-quality carbon credits are used

IETA recommends to procure carbon credits that have been issued by a reputable, experienced carbon crediting program and which have an independent, third-party quality label or program endorsement like those falling under CORSIA; and to conduct further due diligence to ensure credits are aligned with the organization’s requirements and by consulting one of the various credit rating agencies and research platforms like MSCI, Calyx Global or BeZero Carbon.

(6) Transparently disclose use of carbon credits

Organizations should publicly and transparently disclose their use of carbon credits on both company-owned channels, as well as existing mandatory and voluntary frameworks, as required. Companies should disclose the quantities and details about the carbon credits that have been retired within a reporting year including project name, type, vintage, location, the program, and methodology under which the credits were issued, purpose of retirement, link to registry retirement listing and any relevant due diligence measures undertaken. Companies are also encouraged to report on the social and environmental benefits and risks of their carbon credits. Where companies are using carbon credits to compensate for under-delivery or missed targets, it is essential to disclose through annual reporting why these targets were missed – that is, clarifying the planned mitigation activity that could not take place, why it could not be implemented, and how long this may last, in line with best practices in quantifying an organization’s climate risk.

As to why IETA has developed this report now, evidence from new modeling indicates there is a strong likelihood that companies may miss near- and long-term net zero targets, risking an overshoot of the Paris Agreement’s objectives.

New modeling by Allied Offsets shows “81% of the world’s largest companies have not set net zero targets,” says Andrea Abrahams, IETA Managing Director, Voluntary Carbon Markets. “The IETA Guidelines serve as a strategic framework for companies to mobilize finance and incorporate carbon credits into their climate strategies. The private sector has a critical role to play and we need to act now.”

About International Emissions Trading Association (IETA)

Founded in June 1999, IETA is a non-profit organization representing businesses committed to smart, well-designed and effective carbon markets to help achieve the goals of the Paris Agreement and reach net-zero emissions by 2050. IETA looks to empower businesses to engage in climate action and pursue net zero ambitions to advance the Paris Agreement’s objectives, and establish effective market-based trading systems for GHG emissions and reductions that are environmentally robust, fair, open, efficient, accountable and consistent across national boundaries.

Invert Insights.

💡 These guidelines follow several other highly discussed guideline and framework announcements from voluntary carbon market leaders including the SBTi’s advocating for the use of carbon credits for Scope 3 abatement and their release of 2 reports outlining guidance for Beyond Value Chain Mitigation (BVCM) as well as the 2 drafts of the new Canadian Sustainability Disclosure Standards currently the feedback stage. This further signifies an industry appetite for establishing standards and frameworks that encourage broader private-sector participation.

💡 Unlike other regulations and guidelines being released, the Guidelines for High Integrity Use of Carbon Credits takes a focused look at the use and application of carbon credits rather than setting corporate targets and making claims. The recommendations are written in a clear, digestible way that makes it easy for companies of all experience levels to interpret and apply to their specific use cases and climate scenarios. More direct guidance like this will further increase confidence in the voluntary carbon market and will be key to a successful industry moving forward.

💡 Finding reputable organizations who can provide oversight in insight is key for organizations when approaching the use of carbon credits in a high integrity way. IETA & ICROA industry trade groups of which Invert is a proud member,  the SBTi and MSCI, and top registry standards Verra, Climate Action Reserve, Gold Standard provide access to trustworthy and reliable information.

💡 The Mitigation Hierarchy Framework is a crucial consideration for organizations to adhere to as it provides the guidance required to address some of the contentious issues regarding the use of carbon credits in decarbonization plans.