SBTi Declares Carbon Credits ‘Ineffective’ in Sweeping Review

A much-maligned global authority on corporate climate action has issued a new opinion on carbon credits, finding them “ineffective” and potentially harmful to mitigation goals, as it works on revising its net-zero standards for thousands of companies worldwide.

After reviewing 111 third-party studies on carbon credits, the Science Based Targets Initiative (SBTi) found [pdf] “the vast majority of evidence submissions, 84%, argue that treating carbon credits as fungible with other sources, sinks, or reductions of emissions is inadvisable, illogical, or damaging to global mitigation goals, with the other submissions not providing a strong view.”

Much of the empirical and observational evidence suggests that “various types of carbon credits are ineffective in delivering their intended mitigation outcomes,” said SBTi.

The review is an interim step as the organization works toward a final position on the issue.

SBTi, which seeks to set credible, science-based standards for private-sector emissions reductions, dropped a bombshell on the climate community in April, when its board appeared to sanction the use of carbon credits for Scope 3 emissions, which usually make up the lion’s share of a company’s carbon footprint.

“The blowback against the board’s proposal was vociferous,” writes Bloomberg. “At least one staff member quit in protest and a formal complaint was filed with the United Kingdom’s Charity Commission alleging that SBTi’s board undermined its mission.”

Now, its recent review damning the effectiveness of the abatement mechanism is being seen as a  rebuttal of the board, whose April decision defied “both good governance and science,” according to Carbon Market Watch (CMW) Executive Director Sabine Frank.

“By granting excessive flexibility to companies, SBTi will lose its raison d’être: promoting robust and effective corporate climate action,” Frank said at the time.

Carbon Credits ‘Hinder’ Net Zero

Published on July 30, the review warns of “clear risks to corporate use of carbon credits for the purpose of offsetting,” including “potential unintended effects of hindering the net-zero transformation and/or reducing climate finance.”

It was released alongside other research documents which will inform the first major revision of SBTi’s Corporate Net-Zero Standard since it was launched in 2021. Another SBTi discussion paper sets out its “initial thinking on potential changes being explored around Scope 3 target setting.”

“SBTi has said that the earlier statement on carbon credits was misinterpreted and that the just-released report should bring greater clarity,” Bloomberg writes.

The review is “a clear rebuttal of the board’s April statement,” Gilles Dufrasne, CMW policy lead on global carbon markets, told Bloomberg.

The review puts the SBTi “back on track to remain relevant for company transformation,” said Thomas Day, carbon markets expert at the New Climate Institute.  “Powerful individuals and corporations with private interests must not be able to write their own rules.”

Controversy Over Offsetting

Several scientist groups, non-profits, and climate advocates have been urging the complete removal of carbon credits from corporate decarbonization toolkits. They argue [pdf] in an open letter that offsetting could delay climate action as it does not reduce the concentration of greenhouse gases, but “simply moves emission reductions from one place to another.” 

“The majority of the billions of credits created up to now are not additional” they write, as, “any reduction in emissions would likely have happened regardless of the carbon market.”

Carbon credits also risk increasing the climate finance gap by “disincentivizing the significant investments needed to ensure profound changes to corporate value chains and economic systems,” they add.

The SBTi board’s move to greenlight carbon credits for Scope 3 emissions abatement was indicative of “a bigger trend of bending carbon accounting rules, undermining actual emissions reductions,” say the more than 80 signatories to the letter, including Oxfam, the Union of Concerned Scientists, and Amnesty International.

Responding on LinkedIn, Climate Collective CEO Anna Lerner Nesbitt wrote she was “bewildered and disappointed” by the letter’s “stereotypical characterization of the voluntary carbon market (VCM).”

She described the VCM as “a low-risk entry point for corporations on their climate journey” and “an important part of a holistic corporate contribution to the Paris Agreement goals.”

“An onramp? That sounds good!” she added.

Scandals Mount

But that’s not the way the story has been unfolding. Some two weeks before SBTi released its review, the Guardian wrote a scathing exposé of the BP-owned carbon credit company, Finite Carbon.

“Finite Carbon, created in 2009 and bought by British multinational oil and gas giant BP in 2020, is responsible for more than a quarter of the United States’s total carbon credits, which it says it generates from protecting more than 60 ‘high credibility, high integrity projects’ across 1.6 million hectares (4 million acres),” said the UK news group.

Many of these projects involve Finite “encouraging landowners to protect trees that would otherwise be cut down,” added the Guardian—which means the trees continue to absorb carbon from the atmosphere. “Finite says its projects have nullified more than 70 million tonnes of harmful emissions, the equivalent of 18 coal plants running for a year—and more than double the total emissions BP reported last year.”

But, after examining around half of Finite Carbon’s credits, offsets rating agency Renoster and the non-profit CarbonPlan found that about 79% should not have been issued.

The trees purportedly protected were never at risk in the first place, the Guardian found.

In an earlier investigation, the Guardian, Die Zeit, and SourceMaterial revealed that more than 90% of forest carbon offsets from the world’s leading provider, Verra, were “worthless.”