Insight Focus

• The Science Based Targets initiative has rolled back opposition to use of credits.
• The board plans to endorse the use of carbon credits to offset Scope 3 emissions.
• Stakeholders are sharply divided over role of offsetting: “business versus science”.

SBTi Announces Scope 3 Changes

The carbon credit market was thrown into turmoil last week after the Science-Based Targets initiative (SBTi) announced that it would support corporate use of carbon credits to offset a share of Scope 3 emissions, which represent total lifecycle emissions from the entire value chain of products.

SBTi is a climate action organisation that enables companies and financial institutions worldwide to play their part in combating the climate crisis. The group issues recommendations and assesses corporate net-zero targets under its Corporate Net Zero Standard.

In a statement published last week the board of SBTi said it “has decided to extend [carbon credits’] use for the purpose of abatement of Scope 3 related emissions beyond the current limits.”

Previously the organisation had declined to approve the use of carbon credits by corporates to offset their own carbon footprints and had instead restricted the use of such credits to achieve so-called “beyond value chain emissions”.

Market Pushes Back

The announcement triggered a furore in the market, with SBTi staff publishing a letter the following day in which it called on the chief executive officer to resign “to mitigate the grave reputational damage caused by the actions of the Board”.

One member of an SBTi advisory group said the move could be interpreted as endorsing offsetting instead of making internal emission reductions and said the announcement had been made without any consultation.

Environmental campaigners threw their weight behind the SBTi staff, saying that the decision to allow the use of carbon credits goes against science, which dictates that total emissions have to decline, rather than credits being allowed to enable emissions to continue.

However, the news was welcomed by carbon market advocates, who pointed out that SBTi’s adoption of a carbon credit mandate would encourage many more corporates to invest in carbon reductions worldwide, particularly in the global South, representing a flow of finance and technology that developing countries urgently need.

Positive Reactions Surface

Many market observers reacted positively to the news, saying that it would unlock a wave of finance and interest in carbon markets worldwide, and could generate many millions of tonnes of carbon reductions. 

Some environmentalists have described the controversial decision as one that pits the science of climate change against business interests, while the pro-market lobby calls it instead a matter of NGOs facing off against developing countries.

SBTi has gathered science-based climate targets from more than 5,100 companies worldwide, of which more than 3,000 are net zero commitments.

The SBTi represents one of three leading organisations that are involved in setting up self-binding guidelines for the unregulated voluntary carbon markets, even as the United Nations is racing to establish rules and regulations for carbon trade among countries.

In addition to SBTi, the Integrity Council for the Voluntary Carbon Market (IC-VCM) and the Voluntary Carbon Market Integrity initiative (VCMI) work to ensure high standards in carbon reduction projects and corporate offsetting respectively.

The carbon credit market operates independently of compliance markets such as the EU’s Emissions Trading System, which sets a gradually declining limit on emissions for more than 11,000 installations within the EU. Other similar “cap-and-trade” systems exist in the UK, California, Korea, New Zealand and ten northeastern US states.