Dive Brief:
- The Science Based Targets initiative, which validates whether global organizations’ climate targets are aligned with leading climate science, released an analysis of carbon credits’ effectiveness Tuesday, which found “various types of carbon credits are ineffective in delivering their intended mitigation outcome.”
- The analysis was one of four pieces of research SBTi released the same day, which also included data submitted to the organization for analysis. Also among Tuesday’s releases was a discussion paper on how corporations should approach setting targets for scope 3 emissions reductions.
- As companies and organizations increasingly look to deal with scope 3 emissions, or emissions generated by entities not owned or operated by the reporting organization, SBTi said in the analysis there is evidence that there could be “clear risks” to corporations using carbon credits to offset their carbon footprint.
Dive Insight:
SBTi’s releases are all part of the organization’s ongoing updates to its Corporate Net-Zero standard, a draft of which is expected to be released for public consultation toward the end of this year’s Q4, according to an email release sent to ESG Dive.
SBTi called for organizations to submit evidence on the effectiveness of carbon credits last year, and its analysis Tuesday found that using carbon credits for the purpose of offsetting emissions poses “potential unintended effects of hindering the net-zero transformation and/or reducing climate finance.” These include credits deemed to have a lower risk of bias. Given these findings, the scope 3 paper maintains SBTi’s standards on carbon credits not being counted as progress towards science-based targets.
“The traditional practice of offsetting, which involves purchasing carbon credits as a substitute for abating value chain emissions, is not accepted under SBTi standards due to potential risks,” SBTi’s scope 3 paper said. However, the organization explored options for corporations to use carbon credits that are still consistent with a net-zero pathway.
The paper includes five examples for companies, including using commodity certificates — or “instruments that certify and convey sustainability information about the production process of different commodities,” according to the carbon credit analysis — for activities taking place within the value chain.
The organization also said that commodity certificates with “low or no” supply chain traceability could be an “interim solution” for scenarios where sourcing activities or commodities that have “unfeasible” global climate goals” or barriers to higher traceability. In this case, the group said this use case could be limited to “high-quality, high-impact certificates from sources that can demonstrably lead to net-zero aligned market transformation” with claims that fit the level of traceability available.
An analysis of the effectiveness of such Environmental Attribute Certificates was not released Tuesday, but SBTi said further evidence papers for energy certificates and commodity certificates would be published at a later date.
The scope 3 paper also said carbon credits could potentially be used to count as supply chain emission reductions, when they represent abated emissions from activities that can be traced to a company’s value chain or to neutralize “residual emissions.” Finally, the paper lays out a scenario where carbon credits could be used to mitigate beyond the value chain emissions.
SBTi said the purchase and retirement of high quality credits addressing emissions beyond a company’s value chain can help companies “contribute to the broader societal shift towards net-zero” by incentivizing them “to abate emissions within the value chain while also taking responsibility for emissions not yet addressed.”
SBTi’s carbon credit analysis noted such approaches “may represent preferable models for accelerating net-zero transformation and increasing climate finance in that those efforts are beyond a company’s efforts to reduce its own emissions.”
An additional statement was released on a commissioned literature review of carbon credits’ climate impact, but the review found only five research papers that met its inclusion criteria. As such the organization and Evidensia, the firm hired to conduct the literary analysis, concluded that “a negligible amount of scientific evidence assessed” was useful and further investigation would need to be done.
The reports come a few months after SBTi initially signaled an openness to expanding corporate use of carbon credits for scope 3 emissions abatement, before a staff revolt led to the organization walking back that statement.
The staff alleged that expanding the use of carbon credits would allow for greater corporate greenwashing, and a coalition of more than 80 organizations recently argued that allowing corporations to use the credits as a tool to meet emissions reductions targets is “likely to slow down global emission reductions.”
SBTi’s evidence analysis Tuesday corroborates this concern, according to Europe’s Beyond Fossil Fuels campaign.
“Today’s findings align with numerous studies showing that carbon offsets are an ineffective tool for cutting emissions,” Jill McArdle, international corporate campaigner at Beyond Fossil Fuels, said in a statement Tuesday. “The SBTi should retract its plan to allow offsets in corporate climate targets, or it risks becoming a tool [for greenwashing.]”
SBTi is seeking public comment on the scope 3 discussion paper.
