1. SBTi releases research on scope 3 emissions and use of carbon credits

On July 30th, the SBTi published four technical outputs as an early step in the revision process for its Corporate Net-Zero Standard. The publications aim to refine the approach companies are using to manage scope 3 emissions. The publications include a discussion paper on how to set scope 3 emissions targets and an analysis of current scientific evidence on the performance of carbon offsetting.

SBTi’s synthesis report highlights the integrity risks of carbon credits and that they might result in “unintended effects of hindering the net-zero transformation and/or reducing climate finance.” However, the publication also included several proposals that would allow companies to use carbon credits to reach their climate targets, such as:

• Using carbon credits that represent “emissions abatement from sources traceable to the company’s value chain” (i.e., similar to “insetting”)

• Using carbon credits to “support neutralization of residual emissions”

• Using carbon credits to support beyond value chain mitigation

Ultimately, the SBTi failed to reach a conclusion on the role of carbon offsets, stating no decision will be made until the end of 2025. It plans to publish a draft update to its net-zero corporate standards in late 2024 and confirmed that its current guidance will remain unchanged until then.

The organization’s lack of clarity and firm guidance drew criticisms from industry professionals, especially regarding the slow timeline to update its Net-Zero Standard. Some anticipated that the “trend of companies leaving SBTi [will] accelerate”—such as Air New Zealand dropping its 2030 climate goals and withdrawing from SBTi—and many felt that the publications did not adequately recognize the tools and market-led efforts that are now available to mitigate the integrity risks highlighted.

At NetaCarbon, while we share the same frustration as our peers, we thought the silver lining is in the Scope 3 Discussion Paperwhere SBTi outlines the scenarios of incorporating high-quality carbon credits in corporate climate goals, as illustrated above. These are effective and solid frameworks, but they need to be institutionalized into the Standard as soon as possible to drive real actions among corporate companies.

2. Over 80 NGOs released a joint statement criticizing the use of carbon offsets

On July 2nd, over 80 charities and industry organizations, including Greenpeace and Oxfam, signed a letter urging companies to adhere to climate strategies that do not include carbon offsetting, claiming that such projects only delay climate action and lack credibility. They specifically called on the Science Based Targets Initiative (SBTi) and the Greenhouse Gas Protocol to continue excluding carbon offsets from their emission reduction methodologies. 

This heightened scrutiny of carbon offsets follows the SBTi’s announcement in April that it was considering incorporating carbon offsets into the strategies companies can use to mitigate specific Scope 3 emissions (covered in our April newsletter here).

Some climate experts responded to the letter, primarily criticizing how it condemns aspects of carbon markets that are not necessarily true. Most importantly, the letter suggests that firms are using carbon credits “to meet emission reduction targets”, while most players see the carbon market as a tool to utilize in addition to, not instead of, internal decarbonization efforts. Nathan Truitt, Executive Vice President of Climate Funding at ​​the American Forest Foundation, emphasized, "No one believes that companies should be able to use carbon credits to 'lower their emissions,' but rather to compensate for those emissions they have not yet lowered. It is a penalty for failing to deliver, not a license to pollute."

Critics of the letter also highlight the potential of carbon credits to encourage more climate action, while recognizing that they are not perfect. Janet Peace, Head of Advisory and Policy at Anew Climate, commented that carbon credit is expected to be just one facet of climate strategies. "They are a tool that can mobilize finance for climate mitigation and can send a price signal that climate action is valuable. While not perfect, significant effort is underway to make them better."

In the urgent race to combat climate change, we must utilize all available tools. Acknowledging the flaws in the carbon market, it is essential to invest time and resources in enhancing their integrity and accessibility rather than attempting to discredit them altogether.

3. VCMI announced a public consultation on its proposed Scope 3 Claim

On July 24th, the Voluntary Carbon Markets Integrity Initiative (VCMI) announced it would launch a public consultation from September 2nd to October 7th on further development of its Scope 3 Claim. 

The Scope 3 Claim will serve as a robust framework for companies taking action on unavoidable Scope 3 greenhouse gas (GHG) emissions. The primary purpose is to provide guidance on how companies can credibly make use of voluntary carbon credits in their climate goals in line with the Paris Agreement. To ensure the claim is not used to avoid reducing decarbonization efforts, the Scope 3 Flexibility Claim incorporates guardrails that limit the total use of carbon credits to 50% of Scope 3 emissions, and only up until 2035.

Key topics addressed in the consultation include the core methodology for the claim, safeguards to prevent greenwashing, and strategies for addressing the gap in scope 3 emissions. Ultimately, the Scope 3 Claim will provide a mechanism for companies to take more substantial action on their unabated emissions and promote increased participation in high-integrity carbon markets. 

While SBTi stalled in its progress to provide more clarity on Scope 3 climate claims, we are pleased that VCMI is taking the lead here, and we look forward to the release of the finalized Scope 3 Claim in early 2025! 

4. Verra introduced ABACUS, a new label that indicates exceptional quality for ARR projects.

Verra, the largest registry for voluntary carbon credits, released its new market label ABACUS on July 29. The new label signifies that an afforestation, reforestation, and revegetation (ARR) project has gone above and beyond the already high standards Verra has originally set for these projects.

For projects to earn the ABACUS label, they must first meet the requirements of the Verified Carbon Standard (VCS) and VCS Methodology VM0047 Afforestation, Reforestation, and Revegetation, and provide additional proof of project quality in several areas, including:

• Dynamic additionality: Rigorously match and observe control areas to measure project additionality in real-time.

• Transparency: Publish all inventory measurements, justify modeling approaches, and report on disturbance monitoring annually in the project area

• Permanence: Restore diverse and ecologically appropriate ecosystems; regularly update their carbon stock stabilization strategy during and after the crediting period. 

• Avoided displacement of food production: Effectively maintain or enhance agricultural production in the project area and surrounding landscape. permanence, transparency, additionality and agricultural production 

The ABACUS label was developed by a third-party working group comprising experts from Amazon, CarbonDirect, the University of California, Berkeley, The Nature Conservancy, and other organizations. The creation of the ABACUS label also influenced the high-integrity criteria for nature-based projects established by the Symbiosis Coalition, a group led by Google, Meta, Microsoft, and Salesforce (covered in our May & June newsletter). 

This announcement signifies significant advancements toward a more transparent and credible carbon market and indicates the registry’s continuous effort to improve its project quality. Ensuring investments in carbon removal methods are legitimately sequestering carbon and promoting biodiversity should be the goal of every ARR project developer, which also increases confidence from buyers or investors of these projects.

5. Gold Standard revised their climate framework guiding organizations to global net zero efforts

On June 27th, Gold Standard, another voluntary carbon standard, released the second iteration of its pioneering climate framework, designed to guide organizations in making substantial contributions to global climate efforts. This revised version addresses new challenges and incorporates feedback to support businesses navigating the complexities of climate strategy.

Key Highlights include:

• Adaptation considerations: New emphasis on the importance of integrating adaptation measures into climate strategies. This focus ensures that organizations are not only reducing emissions but also building resilience against the inevitable impacts of climate change. The framework provides detailed guidance on identifying and implementing adaptation actions that align with broader sustainability goals.
  
  

• Responsibility for Unabated Emissions: The revised framework offers clear guidelines on how to account for and address emissions that cannot be eliminated through direct reduction measures. This includes the adoption of high-quality carbon credits to offset residual emissions, ensuring that organizations contribute to global net-zero goals even as they work towards complete decarbonization.
  
  

• Scope 3 Emissions Management: Recognizing the complexity of managing scope 3 emissions, which often constitute the majority of a company's carbon footprint, the framework provides enhanced guidance on measuring, reporting, and reducing these emissions. It encourages companies to engage with their supply chains and invest in projects that deliver verifiable emissions reductions. By offering practical tools and best practices, the framework helps businesses take a more proactive and comprehensive approach to managing their indirect emissions.

The new framework will provide even more clarity on how to navigate the complexities of the carbon market. If you are interested in learning more, please reach out to us and we are excited to discuss with you how your organizations can achieve your climate goals through engaging the carbon market. 

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That’s a wrap for July! If you enjoy this newsletter and want to receive NetaCarbon’s blog posts directly to your inbox, please sign up for our blog post distribution list here. Please also reach out if you have any questions or feedback for this month’s coverage!