1. The Revised SBTi Corporate Net-Zero Standards 📋

On April 9th, the SBTi’s Board of Trustees announced that carbon offsets and other “environmental attribute certificates” can be used by companies to abate their Scope 3 emissions under its Corporate Net-Zero Standards, marking a major reversal of its previous firm stance against offsetting. The organization commits to issue the drafted rules and guardrails for public consultations in July 2024. 

As covered in our March newsletter, SBTi has previously maintained that carbon offsetting is a way to deliver “beyond value chain mitigation” (BVCM) above and beyond an organization’s SBTi-aligned emission reduction targets, thereby not counted toward their SBTi targets. That’s why the industry was pleasantly surprised by the announcement: Corporates have been “sitting on the fence” in their carbon credit purchase decisions as SBTi has not allowed that. Without limitations from SBTi, Bloomberg estimated that demand for carbon offsets will grow tenfold from 164 million tons today to 1.37 gigatons in 2030.

Not everyone is excited, though. The varying quality of historical carbon credits gives rise to “greenwashing” concerns, and many fear that companies will scale down their decarbonization efforts when offsetting becomes an option on the table. SBTi’s staff issued a statement, claiming that the Board acted “without a sound scientific basis” and has undermined its Standard Operating Procedures by bypassing its own technical advisory group. In response, SBTi’s CEO reinforced that the revision process is ongoing, there is no change to the SBTi standard for now, and the first draft will be published before July 2024. 

How the SBTi rules will become is going to have a huge impact on the growth of the voluntary carbon market. We remain steadfastly confident in the power of the carbon market to complement decarbonization actions in achieving corporate climate goals, understanding also that the key is to ensure the quality and transparency of the credits used. We will continue to analyze this as events unfold at the SBTi.

2. IETA’s Guidelines for High Integrity Use of Carbon Credits ✒️

Days after SBTi published the above statement, The International Emissions Trading Association (IETA) also issued its first “Guidelines for High Integrity Use of Carbon Credits”, doubling down on recent efforts to guide carbon credit buyers on how to ensure the quality of carbon credits they purchase.

The six guidelines are straightforward, namely:

1. Demonstrate support for the Paris Agreement Goals

2. Quantify and publicly disclose scope 1, 2, and 3 emissions profiles

3. Establish net zero decarbonization pathway and near-term targets

4. Use carbon credits in line with the mitigation hierarchy

5. Ensure that only high-quality carbon credits are used

6. Transparently disclose the use of carbon creditsThese guidelines are aligned with existing industry best practices, such as the “mitigation hierarchy” covered in the Oxford Offsetting Principles (covered in our March newsletter) and the definition of high-quality carbon credits defined by the ICVCM (also see our prior blog post).
   
   

We welcome the clarification proposed by these Guidelines. From our conversations with corporate sustainability officers, we realize that many companies are hesitant to engage in the voluntary carbon market due to confusion about how to do so legitimately. The IETA Guidelines provide a clear outline of steps to be taken by sustainability teams when developing their carbon offsetting strategies.

3. ICVCM approves the first three registries that met its standards 📌 

In August 2023, we covered the 10 Core Carbon Principles (CCPs)–criteria and benchmark of high-integrity carbon credits–published by the Integrity Council of the Voluntary Carbon Market (ICVCM). After 8 months of deliberation, ICVCM finally approved Gold Standard, ACR (formerly American Carbon Registry), and Climate Action Reserve as the first three registries that meet the CCP criteria for effective governance, transparency, tracking and robust independent third-party validation and verification. 

Notably, the industry’s leading player, Verra, accounting for 70 percent of the market, is left out in this announcement. The Council stated that they expect a decision to be made by May, while other registries (including ART, Social Carbon, and Isometric) are also waiting for their results. Once approved, the programs can use the CCP labels on credits on methodologies that are also separately approved by the Council. 

The hope is that ICVCM’s CCP labels can support corporate buyers in differentiating the quality of the carbon credits and spur demand and prices for the ones that meet the rigorous standards. We applaud the hard work of the ICVCM — the important next step here is to build broad recognition of the labels among buyers and the general public to rebuild the reputation of the carbon market.