In April 2024, the Science Based Targets Initiative (SBTi) made a statement that it would revise its guidance to allow companies to use some environmental attribute certificates (EACs) – which can refer to tools including carbon credits and certified lower-emissions commodities – for abatement purposes on scope 3 emissions. The announcement has caused a stir, from excitement at bolstering market signals driving finance to critical climate solutions, to concerns that too much flexibility might let companies off the hook for their own internal decarbonization. Here we unpack what this announcement means.
It’s not just about carbon credits…
This is not just carbon credits news: SBTi is proposing greater flexibility for companies to meet their scope 3 targets, potentially giving companies a clearer path to net zero through use of EACs. While EACs include carbon credits, EACs do not only refer to carbon credits. SBTi provided a full definition in their Call for Evidence on this topic last fall – EACs can include electricity, green hydrogen, green gas, sustainable aviation fuel certificates, emissions reductions, and certified commodities conveying a specific emission factor, such as green steel. We’ll be watching what tools and methods are eligible for use in Scope 3 abatement as SBTi publishes revisions to its flagship Corporate Net-Zero Standard including draft rules, thresholds and guardrails for EAC use in July 2024.
…it’s about scope 3 abatement and the use of market mechanisms
We should not jump to the conclusion that allowing limited flexibility for companies’ value chain emissions on the path to net zero would let companies off the hook for their own internal decarbonization. While the announcement is surprising to some, and is big news for SBTi, this is in line with the trends we see across standards bodies.
Both SBTi and the Greenhouse Gas Protocol (GHGP) have seen consistent requests to open the door for market based mechanisms – especially from companies with immensely complex global value chains. GHGP's forthcoming work on market-based accounting methods, Verra's Scope 3 Program, the Value Change Initiative, and the Center for Climate and Energy Solutions (C2ES) Advanced and Indirect Mitigation (AIM) Platform all are doing heavy lifting to provide rigorous pathways. The announcement from SBTi is a step towards leveraging these emerging programs and methods in line with SBTi frameworks.
We need to accelerate and prioritize impact
Executed correctly, SBTi’s proposed change can be a welcome boost to corporate climate action. The UN Climate Chief just reminded us we have two years to save the planet. Increasing financial flows to agriculture as a climate solution is a key pathway to meeting global climate goals. Market-based mechanisms are particularly important when:
• Companies purchase products or commodities from common pools or distribution systems and direct supplier identification or data collection is difficult or infeasible and
• Companies are interested in co-investing in decarbonization across or within supply chains
These are frequently the case in agriculture. We can – and should – get better at directing funds to these kinds of existing solutions.
Big picture
This is an important step forward toward being able to meet corporate needs for more use of market-based mechanisms, allowing for co-investments and some more creativity in meeting ambitious climate targets. Lower-carbon commodities, Sustainable Aviation Fuel (SAF), and ag soil carbon programs can all be further incentivized if SBTi can bring this update forward, and bring the climate community along with it. We will be following this closely over the next several weeks and months and will be sharing our insights and experience with you to help make sense of the latest developments in this fast moving industry.