4 possible outcomes of the proposed flexibility on carbon credits. At the heart of the debate lies a fundamental question about how to advance global decarbonization. Source: metamorworks via Shutterstock On April 9, the board of trustees of the Science Based Targets initiative (SBTi) announced forthcoming updates to its net zero standard, proposing to allow the use of some environmental attribute certificates (EACs), including carbon credits, towards Scope 3 abatement. Since then, climate watchdogs both within and beyond SBTi have hotly debated whether the new flexibility will maintain best practices in corporate climate action. At the heart of the debate is the role of carbon credits in corporate net zero plans, and whether they accelerate or delay global decarbonization. The announcement comes as companies are falling 1.4 gigatons of carbon dioxide (GtCO2) short of their current annual Scope 3 emission reduction targets under the existing SBTi net zero guidelines. That gap threatens to grow to over 7 GtCO2 of unabated Scope 3 emissions by 2030, according to a recent analysis from MSCI Carbon Markets, one of the most influential carbon market analysis firms. SBTi’s announcement included no details regarding what types of credits will count, what portion of Scope 3 emissions will qualify for EAC abatement, the timeline during which companies can use the flexibility, nor what requirements companies will need to meet before engaging with the more flexible standard. That makes it impossible to say exactly how the update will affect corporate climate strategy and carbon markets; but here are four plausible outcomes of increasing flexibility in Scope 3 abatement rules, based on recent carbon market models and announcements. Meeting Scope 3 decarbonization goals has been the biggest barrier to companies looking to set SBTi net zero targets, according to research from SBTi. The new framework provides additional paths to corporate... |