SBTi: A Way Out of the Carbon Offset Controversy?

Two new SBTi documents pave the way for a positive resolution to the controversy over carbon offsets

On Tuesday, July 30, the Science-Based Targets Initiative (SBTi) published two in-depth analytical reports on two key topics:

• a proposal to revise themethod for setting emission reduction targets,
• and a literature review on theThe Effectiveness of Carbon Credits in the Context of Corporate Climate Goals.

The publication of these reports comes at a critical juncture. First, they follow the controversy sparked last April by the SBTi Board, which, in a unilateral and controversial move, declared its support for the use of carbon credits (and, more broadly, EACs, or “environmental attribute certificates”) as a substitute for companies’ own emissions reduction efforts. Second, these documents are being released as part of the revision of the Net Zero Standard, the organization’s flagship methodology published in 2021 that guides companies in setting targets consistent with the Paris Agreement.

These two documents generally run counter to the SBTi Board’s problematic decision last April and reinforce the position of the companies, climate organizations and professionals (including Carbone 4) who have spoken out against the use of carbon credits as a means of reducing emissions.

What do these two reports contain?

The first report, “Aligning Corporate Value Chains with Global Climate Goals”, aims to share the ongoing discussions within the SBTi regarding reforms to its well-known method for setting climate targets for companies. In particular, the SBTi recognizes that using Scope 3 as the primary performance metric is problematic in several respects, notably because there is significant variability in its calculation, but also because it combines issues that are actually very different for the company (purchases, product use, etc.) into a single grand total of metric tons of CO2. Incidentally, Carbone 4 had already identified this pitfall and is currently developing an alternative metric, the Paris Agreement Compatibility Score (SCAP), in an effort to overcome it, at least in part.

The document proposes innovative and constructive solutions to overcome these problems, such as identifying the most critical sources of emissions within their operations and setting “alignment targets” and specific “policies,” expressed not in metric tons of CO2 but in concrete indicators. For example, an automaker might need to set a target for the share of electric vehicle sales, rather than a vague, aggregate target in metric tons of CO2.

Furthermore, the report notes that theThe purchase of carbon credits is not a satisfactory solution for reducing companies’ Scope 3 emissions.

The second report, “Evidence Synthesis on Carbon Credits”, aims to present the results of the SBTi’s analysis of the existing literature on the effectiveness of carbon credits in helping companies meet their climate goals. Of the approximately 100 documents deemed relevant to the issue (peer-reviewed papers, government reports, news articles, case studies, etc.), those considered most reliable provide a clear body of evidence on three distinct themes:

• The Ineffectiveness of Certain Compensation Projects : The literature shows that many types of projects that generate carbon credits fail to deliver the promised emission reductions or avoidance.
• Risks to Corporate Climate Strategies : The literature shows that there may be clear risks associated with using carbon credits for offsetting purposes, such as delaying profound transformation within companies and/or reducing the total amounts allocated to climate finance. Contribution-based approaches could represent more desirable models for companies’ use of credits.
• Communication Challenges :The literature questions the legitimacy of compensation claims, in the sense that it is illogical and harmful to suggest that credits are fungible with emission sources and carbon sinks.

What are the next steps?

These two documents aim to provide food for thought in the context of the public consultation on revising the SBTi’s Net Zero Standard. Although they explicitly oppose the use of carbon credits to reduce Scope 3 emissions, nothing has been decided yet. It is therefore crucial that stakeholders in the climate ecosystem who agree with these two documents speak out and respond to the Public Consultation on the Revision of the Net Zero Standard, and provide their feedback on the Scope 3-specific document.

In an upcoming in-depth article, Carbone 4 will explain in detail its position on carbon credits and Environmental Attributes Certificates (EACs).