The Science Based Targets initiative, SBTi, recently published an evidence synthesis report regarding the effectiveness of Carbon offsets in corporate climate targets. This report aimed to gather data across three main themes. We have reviewed the 104 pages of this report, and here is our take on current important questions. This article discusses the quality of offsets, various offsetting methods, and common sustainability claims made by brands and companies.
This report discusses the evidence in three main themes.
The first theme inspects whether carbon credits are actually achieving their promised environmental benefits. The second theme explores the risks of corporate use of carbon credits. Among these risks are the unintended effects of hindering the net-zero transformation and/or reducing climate finance. At last, the third theme explores the legitimacy of offsetting claims. It argues that credits are not to be used interchangeably with emissions reduction and points out that there is some confusion and disagreement about the meaning of terms used surrounding claims.
Theme One: Theme 1 (Mitigation Outcomes and Conditions for Effectiveness)
Our Take: Carbon Credits lack quality control.
Across all methodologies and geographical locations certain credits are found ineffective. The technical complexities involved and lack of transparency have created a theme of mistrust toward the effectiveness of these credits.
Solutions? In addition to the much-needed increase in authorities’ oversight, using science-based carbon credit ratings such as the Azzera Impact Score, Sylvera Carbon Credit Rating, and BeZero ratings ensures that the funding made through the purchase of carbon credits creates effective climate action.
These rating systems can potentially restore trust in the voluntary carbon markets. Further, a verifiable, third-party rating allows project developers to showcase the yielded mitigation outcomes and emphasize how the financial incentive from credit sales made them additional.
Theme 2: Corporate Use Cases for Carbon Credits and Implications for Net-Zero Aligned Transformation and Climate Finance
Our Take: Carbon Credits must not replace the company’s responsibilities to reduce their own emissions.
The corporate use of carbon credits for offsetting presents distinct risks, including the potential unintended consequence of delaying the transition to net-zero emissions and reducing climate finance. If companies rely too heavily on carbon credits without making efforts to reduce their direct emissions, they may hinder progress toward genuine sustainability.
However, among the main use cases of carbon credits, approaches such as beyond value chain mitigation (BVCM) and contribution models offer promising alternatives. These approaches focus on purchasing and retiring high-quality carbon credits outside a company’s own value chain. By doing so, they not only help mitigate greenhouse gas emissions but also support near-term and long-term science-based targets. This strategy encourages companies to go beyond merely offsetting emissions and fosters genuine progress toward net-zero transformation.
Beyond Value Chain Mitigation is the purchase and retirement of high-quality carbon credits outside their own value chains to mitigate GHG emissions in addition to their near-term and long-term science-based targets.
Theme 3: Claims
Our Take: There are many pitfalls and risks that come with Offsetting Claims and Compensatory Claims
Assuming companies have taken the correct approach to BVCM with high-quality carbon credits, there is still much argument towards claims. Some argue that offsetting/compensatory claims cause confusion among consumers and highlight risks associated with misleading corporate climate claims, as well as increasing litigation and liability risks.
On the other hand, non-offsetting (i.e. contribution claims) avoids many of the pitfalls and risks that come with offsetting and is thus preferable over compensatory claims. Worthy examples among non-offsetting claims are “contribution to a quantified GHG reduction or removal goal” and “contribution to a global net-zero goal,” which highlight the actions taken by corporations.
By adopting contribution claims, companies can communicate their commitment to genuine sustainability efforts and build trust with consumers and stakeholders. This approach encourages businesses to invest in initiatives that drive tangible progress toward global climate objectives, reinforcing their role as responsible corporate citizens.
In conclusion, the SBTi report highlights significant issues with carbon credits, including inconsistent quality and effectiveness due to varying methodologies and transparency problems. Reliance on these credits can also impede direct emission reduction efforts and impact climate finance. The report recommends using high-quality credit ratings and Beyond Value Chain Mitigation (BVCM) approaches to enhance effectiveness. Additionally, clear and accurate claims are crucial, with non-offsetting methods offering a more transparent way for companies to demonstrate their climate contributions. Overall, while carbon credits have potential, they require careful management to support global climate goals effectively.
