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SBTi: Carbon Credits to get a Green Light for Scope 3 Emissions Abatement.

Read more in the April 12 edition of Invert Insights.

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In a statement this week, the Science Based Targets Initiative (SBTi) has advocated for the use of environmental attribute certificates for abatement purposes on Scope 3 emissions. After six months of extensive consultative efforts, SBTi has determined that the use of these certificates, which include carbon credits, could function as an additional tool to tackle climate change and accelerate corporate climate action.

In their statement, the SBTi recognized the healthy debate within the climate industry surrounding the use of carbon credits, but they stand by their choice; noting that when properly supported policies, standards, and procedures are in place, the use of environmental attribute certificates –  including carbon credits – to abate emissions could function as a meaningful step towards tackling climate change for companies that would otherwise not be able or willing to participate. This announcement has renewed discourse and debate across the climate industry, even amongst the SBTi’s own staff and advisors, as many continue to share their support or dismiss these recommendations within social communities like LinkedIn.

The guidance is a shift from the SBTi’s previous position on carbon credits, which advocated for their usage but did not allow for their usage in meeting targets. Just last month, Carbon Pulse reported that the SBTi did not expect to validate the use of carbon credits to help a company achieve its emission targets. 

The SBTi are not the only group advocating for the use of carbon credits. Research published last year by MSCI Carbon Markets indicated that companies using higher quality carbon credits on average have better emissions performance and reduce their emissions faster than those that do not. This guidance also aligns with the position of the Voluntary Carbon Market Integrity Initiative (VCMI) who support the use of carbon credits for scope 3 emission claims.

It’s widely expected that this announcement will bring renewed demand to the voluntary carbon market, although the full rules, thresholds, and guidelines won’t be released until July, so time will tell on how this shift will correspond to increased future demand for carbon credits.

This latest guidance is one of many recent announcements from the SBTi as they work through revisions to the Corporate Net-Zero Standard. At the end of February, they released 2 new reports to support the design & implementation of beyond value chain mitigation (BVCM) strategies designed to help accelerate corporate climate action. These two frameworks provided much needed clarity on extending corporate investment to mitigate broader emissions in support of improved, global economic and social infrastructure.

Most recently, the SBTi announced they’ve removed 239 of the world’s most prominent organizations including Microsoft, Procter & Gamble, Unilever & Walmart from their Corporate Net-Zero Standard for failure to set a net-zero target. 
The group also shared in January that the number of companies and financial institutions setting greenhouse gas (GHG) reduction targets and having them validated by the Science Based Targets initiative (SBTi) doubled in 2023 (up from 2,079 in 2022) showing ongoing support and participation within the voluntary carbon market.

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💡 Why is this update particularly significant?

Scope 3 emissions pose a significant barrier for organizations on the path to decarbonization and this decision will help organizations reach decarbonization faster, specifically where full reduction of emissions is currently not possible. Scope 3 often makes up the majority of a company’s carbon footprint but at the same time can be incredibly challenging to assess, track, measure, and mitigate.

Generated through the value chain, Scope 3 emission abatement can be complex as companies may not have direct control over their suppliers, customers, and other stakeholders. In addition, gathering accurate data on Scope 3 emissions can be difficult due to the sheer number of entities involved and the varying levels of transparency among suppliers. Data may be incomplete or unreliable, making it challenging for companies to set meaningful reduction targets and track progress effectively. The process is time consuming, complicated, and expensive for most organizations.

In the final report released on their Business Ambition for 1.5°C campaign, the SBTi shared that the majority (53.6%) of organizations reported Scope 3 being too much of a challenge to tackle including 21% of those companies who were not able to set a net-zero target and were subsequently removed in January from the Corporate Net-Zero Standard.

💡 What does this mean for future voluntary carbon market forecasts?

This latest update from SBTi marks a huge win for the VCM and organizations looking to proactively take steps towards decarbonization. It provides the needed assurance of the role carbon credits play for organizations, especially those who classify as high emitters who have difficult to abate emissions. So far, many companies have been hesitant to invest in decarbonization efforts because of perceived regulatory risks or confusion over what might be included within future climate policies.

About the Science Based Targets Initiative (SBTi)

Formed in 2014 as a collaboration between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), SBTi develops standards, tools, and guidance which allow companies to set greenhouse gas (GHG) emissions reduction targets in line with what is needed to keep global heating below catastrophic levels and reach net-zero by 2050, at the latest. Their Net-Zero Standard and sector-specific guidance help companies worldwide make meaningful steps towards decarbonization. 

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