A newly published review by the Science Based Targets initiative (SBTi) of the risks of using carbon credits to mitigate Scope 3 emissions has frustrated companies that had been anticipating a revised version of SBTi’s widely used corporate decarbonisation standard.
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SBTi released four technical papers that examined the effectiveness of carbon credits and other environmental attribute certificates on Tuesday, and said that a revised draft of its corporate net-zero standard would not be published until late 2024. The draft will be open for public consultation with a 12 September deadline for feedback.
SBTi, which is the leading standard for corporate climate targets, said in April that it may consider allowing companies to use carbon credits to offset their Scope 3, or full value chain emissions, in their decarbonisation plans – a move that was welcomed by businesses struggling to meet sustainability targets but bitterly opposed by environmental groups and SBTi staff. The uproar led to the resignation of SBTi’s chief executive last month.
In its lengthy review of research on the effectiveness of carbon credits, SBTi indicated that the priority for companies should remain direct decarbonisation of the value chain without using carbon credits as a substitute.
The reports showed mixed evidence of the effectiveness of carbon offsets to mitigate Scope 3 emissions, which typically account for about 75 per cent of a company’s carbon footprint.
The review was met with disappointment by proponents of carbon credits to offset emissions. It was published amid plans to create an Asean standard for carbon projects and the day before the launch of a carbon markets association in Singapore that will make it easier for firms to source carbon credits to offset their emissions.
Consultation bubble
Sandeep Choudhury, director of Bangalore-based carbon finance advisory VNV Advisory Services, said in a LinkedIn post that SBTi was locked in a “bubble” of consultation to get the net-zero standard right, and had overlooked the people whom climate finance is supposed to benefit, for example climate-vulnerable local communities.
He said that carbon projects had been left “stranded” because of protracted wrangling over whether carbon credits should be included in corporate decarbonisation programmes, and suggested that the drawn-out process was rooted in SBTi’s desire to be “secure from criticism”.
Choudhury called decision-makers in Brussels “self-proclaimed guardians of climate action” who do not understand the climate issue. “In the guise of getting this right, we have left people stranded, people whose basic income is less than your coffee expenses every month,” he said.
Ben Rattenbury, vice president of policy at carbon data provider Sylvera, said in a post that SBTi’s analysis was “out of date”, as some of the identified risks, such as miscalculating the climate impact of carbon projects, can now be mitigated, for instance by using independent ratings systems.
Ana Haurie, co-founder of Respira International, a London-based carbon credits trading firm, said in a statement shared with Eco-Business that indecision over the use of carbon credits to meet sustainability goals was prompting businesses to roll back net zero targets.
SBTI’s discussion paper was published on the same day that Air New Zealand abandoned a 2030 emissions reduction target, citing difficulties in meeting decarbonisation targets in the hard-to-abate sector.
A former SBTi executive told Eco-Business that since its founding after the signing of the Paris Agreement in 2015, the organisation has never considered carbon credits as a replacement for the direct decarbonisation of the value chain.
Target scrutiny
SBTi’s review is necessary, given how quickly the regulatory landscape is changing, said Steve Newman, chief sustainability officer of EarthCheck, a sustainability consultancy.
It highlights the challenges of verifying net-zero claims that will come under greater scrutiny as a result of the European Union’s Green Claims Directive (EU GCD), which aims to clamp down on greenwashing, for instance green claims that over-rely on carbon offsets, he said.
The EU GCD requires decarbonisation claims to be based on measurable, achievable, and time-bound targets, and any SBTi-based claims will require tangible decarbonisation – not just measurement and target-setting, Newman said.
This remains particularly challenging when engaging across the value chain, including accessing primary data, and there are always going to be adjustments to make, he noted.
“The EU GCD is separating offsetting from green claims to avoid a “pay to pollute” approach and provide traceability and transparency, and I see the SBTi addressing some of this with the evidence review of environmental attribute certificates,” Newman said.
The former CSO of Banyan Tree said that while SBTi has gained traction among businesses in Asia – SBTi’s fastest growing region – there has been pushback against “moving goalposts and changing methodologies”, and the discussion paper should help businesses stay on top of a changing risk landscape.
The chief sustainability officer of a Hong Kong-based firm, who asked not to be named, added that relatively few Asian firms were setting full-term science-based targets – that is, short- as well as long-term targets – because of a lack of viable SBTi-aligned transition pathways.
If more options are available to Asian firms to mitigate their Scope 3 emissions, such as the use of carbon credits, then more would participate in the SBTi ecosystem and set full-term targets, she said.
