If not offsets, then what?

SBTi, scope 3 emissions, and carbon offset credits

In April 2024, the Board of the Science-Based Targets initiative announced that SBTi “has decided to extend their [carbon offset credits] use for the purpose of abatement of Scope 3 related emissions beyond the current limits,” and that “a first draft of basic rules, thresholds, and guardrails for the potential use of environmental attribute certificates for abatement purposes of Scope 3 emissions will be issued by SBTi by July 2024.”

SBTi staff quickly responded to the statement, saying no such decision had been taken and, notably, calling for the resignation of the CEO and those members of the board that had voted in favor of the statement. According to media accounts, only one member of the board voted against the statement, Manuel Pulgar Vidal, of WWF.

In their communications with the board and the public, SBTi staff described a set of research projects that were underway in support for the revision of the Corporate Net Zero Standard, which is due to be finalized at the end of 2025. The projects described included a discussion paper on challenges and potential approaches to enhance scope 3 target setting, and a review of evidence of the effectiveness of carbon credits, energy attribute certificates, and commodity certificates.

SBTi released a set of research products on Tuesday 30 July that are to feed into the revision of the Corporate Net Zero Standard, including the aforementioned discussion paper on scope 3 target setting and an evaluation of the evidence of effectiveness of carbon credits.

The documents are noteworthy for several reasons:

·       The Board’s April overreach was confirmed, as the scope 3 paper issued is indeed only a discussion paper, with clearly no decision taken on extending the use of carbon credits for scope 3 emissions abatement, nor is there a draft of “basic rules, thresholds, and guardrails” for the potential use of what they are calling “environmental attribute certificates.” On the contrary, the discussion paper affirms that carbon credits used for offsetting are not allowed under SBTi standards

o   “It is important to note that SBTi standards require that carbon credits are not counted as emission reductions toward the progress of companies’ science-based targets.” (p. 39)

·       The weight of the evidence reviewed on the effectiveness of carbon credits is very clearly negative, with conclusions on lack of effectiveness and the unsuitability of carbon credits to contribute to net zero transformations, and highlighting that carbon credits are not interchangeable with fossil emissions

o   “The limited selection of empirical and observational evidence in Tiers A and B suggests that various types of carbon credits are ineffective in delivering their intended mitigation outcomes.” (p. 66)

o   “The evidence submitted to the SBTi generally suggests that there could be clear risks to corporate use of carbon credits for the purpose of offsetting, with the potential unintended effect of hindering the net-zero transformation and/or reducing climate finance.” 
(p. 47)

o   “The vast majority of evidence submissions (84%) argue that treating carbon credits as fungible with other sources, sinks, or reductions of emissions is inadvisable, illogical, or damaging to global mitigation goals, with the other submissions not providing a strong view.” (p. 66)

·       The review of evidence on carbon credit effectiveness provides significant support for the use of carbon credits only as a contribution above and beyond the emission reductions required by companies in their value chains to keep below 1.5C of warming, rather than compensation through use of carbon credits for offsetting or insetting

o    “BVCM [Beyond Value Chain Mitigation] and contribution claim approaches may represent preferable models for accelerating net-zero transformation and increasing climate finance in that those efforts are over and above a company’s efforts to reduce its own emissions.” 
(p. 9)

o   “Around half of the evidence submissions explicitly support the use of contribution claims over offsetting/compensation/counterbalancing claims.” (p. 66)

If not offsets, then what?

The SBTi discussion paper on Scope 3, “Aligning corporate value chains to global climate goals,” outlines a number of new approaches to addressing value chain emissions. The paper reflects the sense of many in the field that how we address scope 3 emissions needs a significant rethinking and it contains a lot of new food for thought. It proposes a more comprehensive set of metrics than just emissions inventories, including outcome-based metrics such as the percentage of suppliers and customers in the value chain that are themselves setting science-based targets. Rather than focus on the abstract and difficult to measure emissions inventory along the value chain, the idea is to use a broader set of metrics that can demonstrate measurable transformation along the value chain consistent with limiting warming to 1.5°C.

Yes, reducing scope 3 emissions is hard and companies are struggling. So is the planet. But avoiding the hard work means avoiding Paris commitments. The answer to scope 3 emissions is not “it’s so difficult, so let’s just use carbon credits”, it’s actually “let’s get much more clarity on the challenges with decarbonization in different value chains and choose approaches that address them specifically and can lead to measurable transformation.” 

The emission reductions needed to keep warming below 1.5°C are across the board. We have to collectively reduce global annual emissions by 90-95% before the middle of the century. Saying “we can’t do this, it’s too hard, we will pay for someone else else do it” is a fundamental and dangerous misunderstanding of the situation we are currently in. Offsetting is just a way of putting off what must anyway be done, with the result endangering all of us with growing climate impacts because of inaction. There is no room in our remaining carbon budget for offsetting. None.

That is our situation and that is the thinking behind Beyond Value Chain Mitigation and contribution claims. The BVCM/contribution approach requires corporates to both reduce their own emissions in line with 1.5°C and in addition provide finance to climate action outside their value chains. A pathway to stay below 1.5°C of warming necessarily means that offsets are a thing of the past. This approach, advocated by climate scientists, NGOs, and SBTi, is gaining significant traction in both voluntary and compliance spaces.