This week, corporate climate watchdog the Science-Based Targets Initiative (SBTi) released its highly awaited review on corporate carbon credits. The review, which follows months of controversy hovering over the organisation, found that “various types” of carbon credits are ineffective in delivering their intended mitigation outcomes.
This document is one of a series of technical publications that is part of a “major revision” of the organisation’s Corporate Net-Zero Standard.
The standard’s long-term target is that companies must cut all possible emissions—usually more than 90 per cent— before 2050. One of the review’s goals is to “address the challenges” related to Scope 3 target setting and implementation.
Scope 3 emissions—upstream and downstream emissions from across business value chains—comprise the lion’s share of most companies’ emissions, and progress on reduction has been slow.
Currently, the organisation’s rules only permit the consideration of carbon credits as an option for “last mile” emissions reductions.
However, back in April, the SBTi made an announcement that suggested it had decided to relax its rules and permit carbon credits to count toward Scope 3 emissions targets.
This was met with uproar, including from the organisation’s own staff, with reports that corporate influence may have potentially influenced SBTi’s 180°.
Staff subsequently called for the resignation of the organisation’s CEO and the board members who supported the decision.
SBTi CEO Luiz Amaral later resigned, citing personal reasons.
Now, after months of waiting and intense debate, a Synthesis Report of evidence on carbon credits has been published.
While no changes have yet been recommended, some have said that the documents appear to indicate a different direction of travel from the one seemingly laid out back in April.
Carbon Credits “Ineffective”
The synthesis report, published Tuesday, outlined that, based on the evidence received, various types of carbon credits are “ineffective in delivering their intended mitigation outcomes.”
In addition to this, the report noted that the evidence suggests that there could be “clear risks” to corporate use of carbon credits for the purpose of offsetting.
“This includes potential unintended effects of hindering the net-zero transformation and/or reducing climate finance,” the report reads.
This echoes the charge from over 80 NGOs earlier this month who, in a joint statement, argued that using carbon credits for offsetting purposes delays climate action.
Indeed, the report also warned that “treating carbon credits as fungible with other sources, sinks, or reductions of emissions is inadvisable, illogical, or damaging to global mitigation goals.”
That said, the report noted that given the “heterogeneity of carbon credits across various project types, methodologies and other conditions,” the findings should be understood as specific to the pieces of evidence submitted to SBTi and “not generalized beyond this.”
In a statement on the published papers, the SBTi said: “While the evidence submitted and examined reveals some trends and provides insights, the findings of the publications are mixed and further work is needed in the next stage of the process to draw conclusions.”
Carbon credits have long been the subject of scandal and over the years, a number of high-profile investigations have found that many schemes are, at best, “junk” and “worthless” and, at worst, linked with harm to Indigenous people and local communities and human rights violations. However, proponents say that carbon credits can facilitate ecological restoration and be a financial tool for the deployment of renewable energy.
Paper Explores Potential Usage Scenarios
Alongside presenting its findings on carbon credits, another discussion paper, also published Tuesday, discussed a number of potential applications for Environmental attribute certificates (EACs).
One scenario presented involves the use of commodity certificates from value-chain activities, while another scenario outlines the use of commodity certificates from sources with “lower or no” value-chain traceability.
Scenario 4 details the use of carbon credits to support neutralisation of residual emissions, while Scenario 5 discusses the use of carbon credits to support beyond value chain mitigation.
However, the report stated that the list of scenarios is not exhaustive or prescriptive, and the inclusion of any of the scenarios is subject to the standard development process.
Sue Jenny Ehr, Interim CEO, SBTi, said the announcement marks a “key step” in the revision process for the Corporate Net-Zero Standard: “Over the last decade, the SBTi has validated the targets of over 5,000 companies with another 3,000 companies having committed to submit targets for SBTi validation.”
“Targets are the first step to decarbonization and 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,” added the organisation’s head.
SBTi Publications Receive Mixed Response
However, the reports published by the non-profit organisation have received a mixed response. Indeed, comments from industry players show that some had hoped for a more concrete decision from the organisation.
“Businesses are once again left without clarity and firm guidance, and because of this, I expect the trend of companies leaving SBTi to accelerate in the next 12 months,” commented Tommy Ricketts, CEO, BeZero Carbon, a carbon credit ratings agency.
However, others have said that the papers signal a return to the organisation’s “science-based mantra”: “..the papers published today stick to the science in ruling out offsets and exploring improvements to the standard, putting the SBTi back on track,” commented Thomas Day, a carbon market analyst at the NewClimate Institute, earlier this week.
This was echoed by Gilles Dufrasne, lead expert on global carbon markets at Carbon Market Watch (CMW): “This paper sets the record straight for SBTi, and is proof that SBTi staff are performing high-quality, unbiased work. It is a clear rebuttal of the Board’s April statement, where specific individuals tried to bulldoze through a proposal that did not have any internal support from SBTi staff or advisers.
Adding: “The board should be guided by the staff, themselves guided by science, to take the right decisions about the role of EACs, not the other way around. Some certificates can play a positive role in corporate decarbonisation, but carbon offsetting is not one of them.”
SBTi’s Chief Technical Officer, Alberto Carrillo Pineda, called the outputs released this week a “critical step” in understanding how the organisation can develop a “more sophisticated approach” to scope 3 to help more businesses set targets.
“The SBTi believes that direct decarbonization must remain the priority for corporate climate action,” added Pineda.
In a statement earlier this month, the organisation said the next major output of the Corporate Net-Zero Standard revision would be the draft Standard for consultation, which is expected by the end of 2024, followed by public consultation. The revised Corporate Net-Zero Standard will come into effect in 2025.