Using carbon offsets for scope 3 emissions

In a significant development, draft guidelines for a new policy set to inform a revised Corporate Net Zero Standard are scheduled for publication in July 2024. This anticipated policy change, announced by the organization’s board of trustees in an April 9 statement, signals a notable departure from previous approaches.

Under the revised guidelines, companies pursuing Science Based Targets will now have the option to utilize “environmental attribute certificates” to mitigate specific Scope 3 emissions. These certificates encompass various carbon accounting mechanisms, including carbon offsets and renewable energy certificates.

This shift marks a departure from the organization’s previous stance, which mandated that proposed emissions reductions for science-based targets must be directly linked to a company’s operations or its supply chain partners. By allowing the use of environmental attribute certificates, the organization aims to provide companies with greater flexibility in achieving their emission reduction goals.

This move acknowledges the complexities involved in addressing Scope 3 emissions, which often extend beyond a company’s direct control. By incorporating environmental attribute certificates into the framework, the organization seeks to facilitate more feasible and practical pathways towards achieving net-zero emissions targets.

As companies navigate the evolving landscape of sustainability and climate action, this shift in policy underscores the importance of adaptive approaches that balance ambition with feasibility. By embracing innovative solutions such as environmental attribute certificates, companies can more effectively align their emission reduction efforts with science-based targets while driving progress towards a sustainable future.

The news comes amid big changes at SBTi, including a push to speed up validation processes and provide more guidance specific to certain industries. The new policy is linked to a pending revision to the SBTi Corporate Net Zero Standard, which guides long-term commitments, and was under consideration for more than six months “after a wide consultative effort,” according to the statement.

“While recognizing that there is an ongoing healthy debate on the subject matter, SBTi recognizes that, when properly supported by policies, standards and procedures based on scientific evidence, the use of environmental attribute certificates for abatement purposes on Scope 3 emissions could function as an additional tool to tackle climate change,” the trustees said.

Detailed guidance still pending
SBTi was created in 2015 to develop and validate science-based targets for emissions reductions that are aligned with the Paris Agreement goal of holding global temperature increases below 1.5 degrees Celsius by 2050.

Last September, the organization embarked on a research project to study the effectiveness of environmental attribute certificates as a corporate emissions reduction driver, including ones for:

  • Renewable electricity
  • Green hydrogen and sustainable aviation fuel
  • Emissions reduction credits or offsets
  • Certified commodities, such as green steel

Also presaging the policy shift was SBTi’s partnership with the Voluntary Carbon Markets Integrity Initiative  (VCMI), which provides guidance on carbon credits. Last December, the organizations teamed up to harmonize their approaches regarding the use of carbon credits.

VCMI is floating the creation of a controversial “flexibility claim” that would let companies cover up to 50 percent of their Scope 3 emissions targets for 2030 with credits rather than actual emissions cuts across their own supply chains. The organization welcomed SBTi’s announcement. “Companies are not reducing emissions fast enough, and most are struggling to meet their Scope 3 goals,” VCMI said in a statement. Without the requirement that they fill any gap with high-quality carbon credits once they’ve made ever reasonable effort to meet their targets, we risk falling even further behind in our efforts to reach net zero.

SBTi hasn’t set its rules for how certificates can be used, and the organization was quick to emphasize that it will not participate in validating carbon credit quality, relying instead on what it called “other entities.”

“SBTI considers this step a way to accelerate the decarbonization of value chains with compensation logic while companies make their way to eliminate carbon emissions at the root through innovation and technology improvements,” the trustees said.

A first draft of the “rules, thresholds and guidelines” for how corporations can use carbon credits and other certificates in their targets is due by July 2024.

800 companies and counting
More than 800 companies already have validated, science-based emissions reduction targets under the current Corporate Net Zero Standard, with another 3,000 committed to doing so “in the near future,” according to a separate SBTi update on April 2.

In March, more than 200 high-profile companies that previously committed to submitting emissions reduction plans under that standard had their status changed to “commitment removed” for failing to submit their targets in time. Many of the companies affected still have validated targets for near-term cuts, and their net-zero commitment status can be reversed once they submit targets.

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