Air New Zealand becomes first major airline to drop 2030 climate goal. (Photo: iStock)
The Science Based Targets initiative (SBTi) was set to release a new draft guideline in July, especially focusing on carbon credit offsets for Scope 3 emissions, which has garnered significant public attention. However, as of August 1, the organization's website still has not posted the revised Corporate Net Zero Standard. Instead, it released a research report indicating that most carbon credits do not help companies achieve their climate goals.
Sherry Hu, an industry researcher at RECCESSARY who has been closely following the carbon market, believes this research underscores the increasing importance of carbon credit quality. And without clear guidance, more companies may withdraw from the SBTi.
SBTi indicates most carbon credits are ineffective highlighting the importance of carbon credit quality
According to the latest SBTi research, only up to 30% of carbon credits purchased by companies can deliver the claimed emissions reduction benefits, hindering the transition to net-zero and climate financing. Hu suggests that companies should pay more attention to the quality of carbon credits they use, recommending reference to evaluations from carbon credit rating agencies such as Renoster, BeZero Carbon, Calyx Global, and Sylvera, which are currently the top four reference indicators worldwide.
She also cautioned that carbon credits obtained through methods like Reducing Emissions from Deforestation and Degradation (REDD+) and clean cookstove initiatives carry higher risks, as their benefits in mitigating climate change may be overestimated, prompting companies to be more cautious in their procurement.
Under current rules, SBTi allows carbon credits to offset 10% of a company's carbon emissions, with the remaining 90% required to come from direct operational emissions reductions. Despite research indicating that most carbon credits are ineffective, SBTi emphasizes the need for further study before drawing conclusions, leaving open the possibility of using carbon credits and discussion regarding the Scope 3 emissions offset proposal. SBTi plans to release a new draft standard by the end of this year, aiming for it to take effect by the end of 2025.
Companies withdraw from SBTi, citing stringent regulations as difficult to meet
Additionally, she noted that the absence of a draft leaves companies in confusion, particularly under the stricter SBTi standards, which may lead more companies to choose to withdraw, resulting in a loss of support for SBTi.
Over the past year, numerous large corporations have exited SBTi, including notable firms like Amazon and Microsoft. In the finance sector, Standard Chartered, HSBC, ABN Amro Bank, and Société Générale have all indicated that SBTi's emissions reduction targets are too difficult to achieve, leading them to shift toward the less stringent, yet still UN-supported, Net Zero Banking Alliance (NZBA).
In the aviation industry, where decarbonization is even more challenging, Air New Zealand has taken the lead by announcing its abandonment of the 2030 climate target, which aimed for a 28.9% reduction in carbon intensity compared to the 2019 baseline, while also withdrawing from SBTi. The company attributed its decision to the high costs of green fuel and supply chain issues causing delays in the delivery of aircraft that use sustainable fuel, resulting in its inability to meet the carbon reduction commitments made to SBTi.
Source: Financial Times, Wall Street Journal, Reuters, Bloomberg
