News Excerpt:

A disputed recent decision by the Science Based Targets Initiative (SBTi) to allow carbon offsetting for Scope 3 emissions of enterprises with SBTi-based climate targets has sparked debate and scepticism.

What is the issue?

• The SBTi board of trustees recently announced its plan to expand the use of 'environmental attribute certificates' (EAC) to reduce Scope 3 emissions.
• SBTi defines EACs as including emission reduction credits (or carbon credits) and energy certificates.

• CDP’s (Carbon Disclosure Project) analysis of emissions across all sectors revealed that Scope 3 emissions, on average, account for 75 per cent of Scope 1+2+3 emissions.

• A new analysis, ‘The Corporate Climate Responsibility Monitor (CCRM) 2024’, by the New Climate Institute and Carbon Market Watch, reveals that Scope 3 emissions could go up to as much as 99%, as seen in the automobile sector. 
• This makes measuring, reporting, and reducing Scope 3 emissions incredibly important for companies.
• In SBTi’s Corporate Net-Zero Standard Criteria, the standard does not permit the use of carbon credits to count as emission reductions toward a company’s near-term or long-term SBTs.
• Instead, they are only to be considered as an option for neutralising ‘residual emissions’, which are emissions that persist after a company has achieved its long-term SBTs.
• Or they can be used to finance additional climate mitigation efforts beyond their science-based emission reduction targets, extending beyond their value chain.

The controversy:

• In recent years, investing in carbon offset projects has allowed some companies to claim ‘net-zero’ or ‘carbon-neutrality’ without reducing their own emissions; 
• In some cases, they also increase emission-intensive activities while relying on carbon offsets.
• The Corporate Climate Responsibility Monitor (CCRM) 2024 highlights the potential consequences of allowing carbon offsets for Scope 3 emissions.
• It argues that such a practice could effectively absolve companies of accountability for a significant portion of their emissions, focusing attention primarily on Scope 1 and 2 emissions, which constitute a smaller share of a company’s total emissions.
• In 2023, submissions were solicited for a call to evidence on the effectiveness of EACs, such as carbon offsets, which were being reviewed by a technical council. 
• This new decision to allow offsetting has led to accusations against the SBTi board of sidestepping the process by not informing the technical council.
• There has been a growing push for using carbon offsetting to address businesses’ Scope 3 emissions. 
• The Voluntary Carbon Market Initiative (VCMI), formed to guide corporate buyers on using high-integrity carbon credits, launched a “Beta Scope 3 Flexibility Claim” recently, allowing carbon credits to offset up to 50 per cent of Scope 3 emissions. 
• The Integrity Council for the Voluntary Carbon Market (ICVCM), a body set up to ‘validate’ high integrity carbon credits, welcomed SBTi’s decision. 
• Carbon market participants have also welcomed the announcement with renewed hopes of a boost in demand for offsets in the voluntary market.
• The New Climate Institute's analysis shows that if the Beta Scope 3 Flexibility Claim is considered, companies like Apple and H&M Group would only need to reduce emissions by 20% and 2%, respectively. 
• Other companies would no longer need to reduce emissions; companies like Mercedes-Benz, Volkswagen Group, and Deutsche Post DHL could increase their emissions covered by Scope 3 targets by 20 per cent, 40 per cent, and 50 per cent, respectively.
• Staff members of SBTi wrote a letter protesting against the decision, calling it problematic and demanding the resignation of the chief executive and board members.
• The decision by SBTi, given its reputation for establishing the scientific underpinning of corporate climate action, is concerning. 
• For one, it contrasts sharply with the dubious history of the carbon offsetting market, which has been criticised for widespread greenwashing practices. 
• Some have also questioned the scientific basis of this decision, more so because the Standard and SBTi itself need to live up to its name. 
• Without sufficient guardrails and stringent oversight, businesses' responsibility to reduce the overall emissions of their supply chain may be written off.
• This could also mislead people into believing that corporates are actually reducing emissions and going green under their science-based targets.