The SBTi Report on Carbon Offsets Omits the Hardest Truth

First we’ll share our takeaways related to the SBTi’s recent reports on using market-based mechanisms for emissions reductions, and then we’ll recap the overall timeline and some key terminology. 

Here’s why these SBTi Updates Matter:

In addition to pursuing emissions reductions, corporations need to be buying carbon removal today.  These recent SBTi events & reports about carbon credits do not change the fact that the SBTi Corporate Net Zero Standard allows a company to use durable carbon removals to neutralize up to 10% of their residual emissions and corporates should start doing this as soon as possible.      

The SBTi’s latest report on carbon offsets has stirred up some mixed feelings in the world of corporate climate action.  The question at the heart of it all was, can carbon credits help offset a company’s Scope 3 emissions in order for a company to reach SBTI’s definition of net zero? Currently, companies face significant challenges in estimating emissions, setting targets, and demonstrating progress towards Scope 3 emissions, which are on average, 11 times higher than a company’s direct emissions and are the most critical factor in determining whether a company reaches its targets.

After parsing through countless evidence (apparently more than 70 days worth of reading), SBTi’s latest report concluded that “various types of carbon credits are ineffective in delivering their intended mitigation outcome.” For example, carbon credits generated by renewable energy projects that would have been built anyways, do not create an additional reduction in atmospheric carbon concentrations. This is in contrast, to say, a carbon removal credit created by bio-oil sequestration which intercepts carbon dioxide from a natural cycle and removes it in liquid form to geological storage - keeping the carbon permanently out of the atmosphere. 

The SBTi then promised to provide an update on carbon credits in their Corporate Net Zero Standard sometime in 2025.   

Why Carbon Removal is Part of the Critical Path Forward

1. To reach a liveable planet by 2050, UN Scientists estimate we need to reduce ~80% of emissions and remove the rest (20%). The message has never been clearer: in order to keep global warming below 1.5 degrees celsius by 2050, eliminating emissions is not enough, we have to actively draw down CO2 through carbon removal solutions.

   1. 20% of 50 billion tons per year is 10 billion tons. For context the global shipping industry moves ~11 billion tons per year.  We need to build the capacity to move as much material as the global shipping industry in the next 26 years. 

   2. Globally, we spent $10B on permanent removals in 2023, both purchases and investment. Compared to $2T on the energy transition as a whole in 2023.  This amount is nowhere near enough to sustain a liveable planet in 2050. My colleague Ed, explained this nicely recently! 

2. The carbon removal goal achievement is not binary - every partial degree C of warming we avoid means lives saved, and billions of dollars in increased GDP. 

3. Governments in the EU, UK, Canada, Japan, and the US are rapidly including permanent removals in their planning for regulated carbon markets by 2030 or earlier in some cases.  Corporates who want to do business in these markets in that timeframe need to take note.   

That’s why in addition to reductions, corporations need to be buying carbon removal to ensure the capacity is actually available when we need it. 

A key question that companies frequently ask when entering into this space is, “How much should we purchase” One organization, Speed and Scale, recommends corporates buy 0.01% of their footprint as removals right now and increase the percentage over time. 

The evidence is clear that we need to build out carbon removals on a scale that will make a dent on global emissions. To date, companies have purchased 5M tons, but we need more ambitious purchases and faster delivery on removals.

Recent SBTI Policy Developments: 

• April 9th, 2024: The SBTi Board of Trustees publishes this statement proposing a revision to their Corporate Net Zero Standard, allowing the use of environmental attribute certificates (including carbon credits), for abatement purposes limited to Scope 3. Several entities provided feedback as this statement is a departure from their long-held position of reducing emissions from a corporation’s own operations and supply chain, with limited scope for offsetting under existing guidelines. 

• April 19th, 2024: SBTi posts this update in response to the extensive feedback received from nonprofits, climate scientists, and SBTi’s own internal staff. 

• May 29th, 2024: Bloomberg publishes this piece delving into the internal disagreements on these issues. 

• May 29th, 2024: SBTi’s CEO publishes this response to Bloomberg. 

• June 20th, 2024: SBTi’s Technical Council (made up of scientists and academics as a separate entity from the SBTi Board of Trustees) sends a confidential letter to SBTi leadership citing a breach of the approved SBTi procedures.

• July 2nd, 2024: SBTI’s CEO, Dr. Luiz Amaral, steps down from his role as CEO.

• July 5th, 2024: Bloomberg publishes a follow-up piece breaking down additional internal disagreements. 

• July 30th, 2024: SBTi releases their preliminary view on the evolution of the SBTi's conceptual framework for scope 3 target setting (which will feed into considerations for the drafting of the revised Corporate Net Zero Standard). This is where our blog post picks up today.

Key Terminology:

• SBTi (Science-Based Targets Initiative): a leading corporate climate action organization that develops standards, tools, and guidance allowing companies to set greenhouse gas (GHG) emissions reductions targets in line with reaching net-zero by 2050.

• Scope 3 Emissions: Emissions that result from activities in a company's value chain that the company doesn't own or control (both upstream and downstream).

• Net Zero Standard: Net zero refers to reaching a state in which the human caused emissions to the atmosphere are fully balanced by carbon removals to the geosphere.  Climate scientists say we need to reach this equilibrium by 2050 in order to maintain a shot at a livable planet.  This equilibrium is most likely to be reached by reducing human caused carbon emissions by ~80% and removing the rest. 

• Carbon Removals: Carbon removals are a type of carbon credit. Climate scientists have concluded carbon removals to the geosphere are most applicable to reach net zero.