Recent SBTi Guidance Risks Stifling Climate Action

Absence of practicable guidelines from SBTi creates opportunity for other organizations
 

As the climate crisis intensifies, the need for effective, scalable solutions becomes ever more critical. Market-based mechanisms, particularly those that employ high-quality carbon credits, offer a practical and immediate pathway to avert the catastrophic environmental repercussions we increasingly face. While many differing opinions on market-based mechanisms are filling up our newsfeeds, the evidence is clear: high-quality carbon reduction and removal credits can bend the cost curve for climate mitigation, providing a crucial complement to internal emissions reductions and enabling far greater impact than “within the fence” activities alone.

Unfortunately, the recent guidance from the Science Based Targets initiative (SBTi) on the use of carbon credits misses the mark. By severely constraining the role of carbon credits in corporate emissions reduction strategies, SBTi’s constrictive and impractical guidelines risk stifling the very progress it aims to support. In fact, they may have a perverse effect of driving more companies away from their net-zero commitments, as goals become unattainable without the flexibility to use high quality carbon credits. Indeed, this disengagement from SBTi commitments has already begun. More than 500 companies once affiliated with SBTi, including climate-oriented organizations such as Microsoft, Diageo, Proctor & Gamble, and Unilever are no longer enrolled in SBTi’s near-term emissions target program.

SBTi’s shortcomings create an opportunity for other respected organizations like Oxford, the International Standards Organization (ISO) or the Voluntary Carbon Markets Integrity Initiative (VCMI) to take the lead. These organizations are already developing frameworks to help companies meet their emissions reduction targets in ways that are potentially more effective and scalable. Their escalated involvement in the debate around effective emissions reductions strategies could help set the standard for rigorous oversight and transparency in carbon credit markets, restoring trust and ensuring that only the highest quality credits are used.

Carbon credits are not intended to be a panacea, but they are an essential part of the solution, especially in the short term, as we work to close the gap between current emissions and the reductions needed to limit global warming. Indeed, with UNEP estimating that global emissions must fall by 42% by 2030 to get us back on track for limiting climate change to 1.5 C, there is simply no way to achieve decarbonization at the requisite speed and scale without environmental markets driving climate finance and innovative solutions.

Supply-side market advancements should also be recognized and encouraged. The Integrity Council for the Voluntary Carbon Market (ICVCM) continues to invest significant resources in identifying protocols that generate high-quality offsets, ensuring that credits contribute meaningfully to climate goals. Additionally, leading carbon registries are consistently advancing their methodologies to ensure higher standards for project quality, and technological innovations are enabling better analysis, monitoring, and carbon quantification.

Several recent government actions are encouraging and have a significant role in providing meaningful guidelines for carbon financing adjacent to the functioning voluntary carbon market (VCM). For example, 1) the SCOPE Act from Congressman Adam Schiff directs EPA to develop a voluntary methodology for reporting corporate Scope 3 emissions. 2) The release of the Voluntary Carbon Markets Joint Policy Statement and Principles by the Secretaries of Treasury, Agriculture, and Energy. 3) CFTC’s proposed guidance affirms market support and seeks to elevate standards efforts underway. 4) The State of California continues to push forward with disclosure requirements for buyers and sellers of carbon credits.

We urge companies with climate targets to openly encourage ISO and the VCMI to be bold and practical in their consideration of carbon credits as crucial climate mitigations tools, and resist falling in line with SBTi’s flawed thinking.

The world simply cannot afford to limit the use of one of the most effective tools available for climate action. Market-based mechanisms, when applied responsibly and transparently, are our best hope for bridging the gap between where we are and where we need to be in the fight against climate change. Let us embrace these tools, refine them, and ensure they deliver the emissions reductions we critically need.