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Carbon offsetting

The SBTi is conducting extensive research into the role that carbon credits and offsetting can play in supporting net-zero targets. But with the voluntary carbon market suffering from a lack of standardisation and concerns over quality, how are businesses interacting with carbon credits?

One of the main questions that businesses are seeking clarity on right now is the role that carbon offsets will play in any future amendment to the SBTi’s guidance and standards.

In April, the SBTi's Board of Trustees confirmed that they intended to allow carbon offsets – formally called “Environmental Attribute Certificates” to be more widely used by corporates. The belief from the Board was that this would help tackle key issues around supply chain action by reducing Scope 3 emissions.

The news itself has led to many of the charities involved in the SBTi pushing back on the intentions of the board, but it is crucial to note that at the time of this Tracker’s publication, nothing has changed.

Under the SBTi’s Net-Zero Standard, absolute emissions reductions must be reduced across all scopes by at least 90% by 2050 or sooner. The remaining 10% can be covered by offsets. A consultation will be launched to revised the Standard later this year and one of the questions seems to be whether this 10% allowance should be increased.

Based on survey results it is clear that the business approach to carbon offsetting is varied. Around one-third (31%) claimed that their organisation was waiting to reduce emissions as much as possible before utilising credits, compared to 20% that are actively using credits now.

Around 12% of businesses are waiting for the guidance to be updated before making a decision on the role of carbon credits in their strategy, while 17% state they do not intend to use carbon credits at all.

Q. What is your company's approach to using carbon offsets?

▉ Utilising credits now – 15%

▉ Waiting until all emissions are reduced – 38%

▉ We do not intende to use credits – 22%

▉ We are waiting on new guidance – 14%

▉ Other 11%

When it came to decarbonisation priorities, 41% of businesses stated that carbon credits were not a business priority compared to other measures such as data management and energy efficiency. However, 14% did claim that offsetting was a “high priority” for their business right now.

There is also the issue of investment into the carbon markets to consider. There has been plenty of controversy as to how carbon offset projects are funded and the actual benefits they are able to deliver – both planetary and societal. As such, there is a reluctance amongst the business community to invest in such initiatives. Our survey found that 50% of businesses believe that the carbon credits market is “currently too risky to invest in”.

Q. To what extent do you believe with the following about carbon offsetting?

Strongly Disagree
Disagree
Neutral
Neutral
Strongly Agree
Carbon offsetting is an integral part of achieving long-term climate targets
12%
25%
20%
32%
11%
Carbon offsetting should only be used for any unavoidable emissions
2%
4%
8%
34%
52%
Carbon offsetting can deliver tangible results in combatting the climate crisis
8%
19%
31%
34%
8%
The carbon credits market is currently too risky to invest in
1%
13%
34%
32%
20%

Evidence inbound

Last month the SBTi released the findings of its ‘crunch’ consultation on corporate approaches to net-zero and decarbonisation, with a heavy focus on the role of carbon offsetting.

Here are a few soundbites from the latest evidence gathering exercise that summarise the current climate for corporate carbon credit purchases. The “quantity and diversity of claims has created confusion amongst corporates and other actors”.

  • The “suggests that various types of carbon credits are ineffective” in delivering their intended mitigation outcomes.
  • The evidence suggests that there could be “clear risks to corporate use of carbon credits for the purpose of offsetting. This includes potential unintended effects of hindering the net-zero transformation and/or reducing climate finance”.
  • There was no evidence submitted that systematically identified features associated with actual credits or projects that do deliver their intended benefits in comparison with those that do not. In other words, the evidence does not identify characteristics or operating conditions associated with effective carbon credits and projects, but instead comments on and describes improvements needed overall.
  • The evidence challenges “the legitimacy of offsetting claims, arguing that treating carbon credits as fungible with other sources, sinks, or reductions of emissions is inadvisable, illogical, or damaging to global mitigation goals”.
  • Work is being done by some well-intentioned companies to improve the market, but more guidance is needed.

It is important to note that the evidence gathered to date has not changed or informed the recommendations set out by the SBTi. The latest guidance is still that of the Net-Zero Standard and should be followed as such and no formal update to the standard is expected until late 2025.

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