The last few months have seen a number of developments in the voluntary carbon market (VCM). In standards setting, the Integrity Council for the Voluntary Carbon Market (IC-VCM) released their draft Core Carbon Principles which received highly varied feedback from voluntary standards. In aviation, EasyJet has put a halt to their offsetting programme. These stories and more can be found in our Voluntary Carbon Market Outlook. These seemed to indicate significant changes coming in the way of the VCM. Notably, there were concerns of a drastic reduction of carbon finance flowing towards project developers.
In the past, the Science Based Targets initiative (SBTi) has used very cautious wording around the use of carbon credits. This discouraged organisations from engaging in the VCM. However, last month, the SBTi announced that they urge the use of beyond value chain mitigations. What impact does this have on the voluntary carbon market?
What are Beyond Value Chain Mitigations?
The SBTi defined Beyond Value Chain Mitigations (BVCM) as “mitigation action or investments that fall outside of a company’s value chain.” This definition can be found under its Net-Zero Standard.
Previously, it was commonly understood that the SBTi’s framework set out the guidelines for corporates to attain net zero. The main requirement is to abate emissions by at least 90% by 2050. In addition, the SBTi recommends setting out near and long-term science-based targets.
Nonetheless, an organisation is encouraged to, alongside their emissions reductions, compensate their emissions. Compensating emissions essentially means procuring carbon credits from the voluntary carbon market. Organisations are thus encouraged to procure carbon avoidance credits in the near-term to reach net zero in the long-term.
This is the same guidance as given by the IPCC, which encourages the procurement of carbon credits to compensate for residual emissions.
What are the limitations?
The SBTi Criteria and Recommendations have laid out that ‘carbon credits must not be counted as emissions reductions.’ Nonetheless, they can serve to compensate for residual emissions or to ‘finance additional climate mitigation beyond […] their reduction targets.’
As the name indicates, carbon projects outside of an organisation’s value chain are encouraged to be supported by carbon finance. An organisation’s value chain refers to their activities. These include production, marketing and after-sales services. These are the activities that generate emissions in the scope 3 of an organisation. While value chain mitigations (i.e. emissions reductions) must remain a priority internally, an organisation is encouraged to invest in offset projects to help finance carbon avoidance, reduction and removal projects that are vital for mitigating emissions elsewhere on the planet.
What impact does this announcement have?
The SBTi has never explicitly said they do not support the use of carbon credits. However, they have always been very careful with their wording and messaging. As a result, many companies working with the SBTi have misunderstood offsetting as going against the SBTi framework.
The announcement that the SBTi urges beyond value chain mitigations has served to clear up any misunderstanding on this matter. The urgency stressed by the SBTi could very well have an impact on the voluntary carbon market. Currently, 3821 companies have committed to taking action under the guidance of the SBTi. For the voluntary carbon market, this could mean a higher engagement in market participation. In turn, higher carbon finance will allow for the development of newer and better technology that could help reduce, avoid and remove higher amounts of CO2 from the atmosphere.
Plannet Zero and science-based targets
Plannet Zero aims to keep up to date on all regulations surrounding the VCM. We are a part of the BSI Associate Consultant Programme. Therefore, we follow the BSI PAS2060 guidance on carbon neutrality. We are also aligned with the Greenhouse Gas Protocol. Nonetheless, we work with a number of businesses to help them reach net zero through science-based targets.
Edited by Tiffany Cheung.