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The Science Based Targets initiative (SBTi) announced that it will allow the use of carbon credits to reduce emissions from Scope 3, according to a statement on its website. Draft guidelines for the new policy, which will inform a revised Corporate Net Zero Standard, are set to be published in July.
The carbon credits market is still recovering from a period of turbulence following revelations of projects that failed to deliver on emissions cuts.
Market participants were quick to respond to the move. Rich Gilmore, chief executive at Carbon Growth Partners, said the decision could be “massively consequential” for the future of carbon prices. Sonia Zugel, CEO of ESG Playbook, called the adjustment “a huge change” to SBTi’s framework.
Tej Virk, co-founder of NLX Capital, said the relaxed guidelines will “invigorate the demand for voluntary carbon credits.” The decision “signals a crucial shift towards the acceptance of carbon credits in corporate climate strategies, promising to boost both the market and the efficacy of these credits in achieving climate action.”
According to Kyle Harrison, head of sustainability research at BloombergNEF, said the decision could help boost the market, which now y is valued between $2 billion and $2.5 billion, to more than $1 trillion a year by 2050.
He also said that for Scope 3-heavy companies, working towards and achieving net zero under SBTi is a moonshot without some reliance on carbon credits.
Previously, SBTi had tried to limit the use of carbon credits to residual emissions, or those that can’t be cut by other approaches. The organization says its revised guidelines follow a “wide” consultation over the past six months.
However, some experts were caught off guard. Nonprofit research group Carbon Market Watch said it “strongly condemns” the decision by SBTi, noting that Scope 3 emissions often make up the “lion’s share of a company’s carbon footprint.”
Stephannie Galdino, a voluntary carbon market analyst, cautioned about the "high risk of greenwashing" stemming from SBTi's decision.
In its statement, SBTi promised to develop “specific guardrails and thresholds” to make sure proper use of credits. It also said it isn’t planning to validate the quality of carbon credits. It expects to issue a first draft by July setting out details of when credits may be used.
“While recognizing that there is an ongoing healthy debate on the subject matter, SBTi recognizes that, when properly supported by policies, standards and procedures based on scientific evidence, the use of environmental attribute certificates for abatement purposes on Scope 3 emissions could function as an additional tool to tackle climate change,” SBTi said.
