Alongside rules and requirements for reducing Scope 1, 2, and 3 emissions, the document establishes a framework for the use of carbon credits as an essential complement to decarbonisation strategies. Here's what you should know about how the SBTi defines carbon credits, when to use them, and why they are important for companies working to achieve net zero.
The SBTi defines a carbon credit as "a certificate or tradable unit that represents one metric ton of carbon dioxide equivalent (tCO₂e) emissions avoided, reduced, or removed relative to a baseline." These credits are certified by carbon standards and issued ex post after "independent verification confirming that the claimed mitigation has occurred."
Carbon credits can be generated from activities that:
The Corporate Net-Zero Standard V2.0 introduces a new approach to corporate emissions reduction, where "changes in the physical GHG inventory shall constitute the basis for any emissions reduction claims." The guidance then classifies actions to reduce those emissions into three levels: the activity level, the activity-pool level, and the sector level. You can read more about them in our dedicated FAQ.
Carbon credits, however, are not part of a company's physical GHG inventory. These avoidance, reduction, or removal processes occur outside a company's operations and do not substitute actions that reduce organisations' actual emissions. Rather, the SBTi encourages companies to use carbon credits as a necessary complement.
The Corporate Net-Zero Standard V2.0 introduces the Ongoing Emissions Responsibility (OER) framework, which encourages companies to compensate for emissions by purchasing carbon reduction or removal credits while they actively reduce their GHG inventory as part of a "holistic net-zero strategy."
In other words, the Corporate Net-Zero Standard V2.0 considers "high-integrity carbon credits and other climate contributions as a complement and not a substitute to companies reducing their carbon footprint." It also recognises organisations that choose to take on this additional responsibility for neutralising their emissions.
The OER framework comprises three components: a voluntary recognition programme, a post-2035 requirement, and a residual emissions requirement at net zero.
The OER optional recognition programme aims to publicly recognise companies that voluntarily neutralise emissions as they progress towards net zero.
The programme is flexible, allowing companies to compensate for anywhere from 1% to 100% of their ongoing emissions in exchange for different levels of recognition by investing in verified mitigation outcomes, such as third-party-assured, ex post carbon credits. Participants who consent to public recognition will be featured in the SBTi Dashboard after completing target validation.
The SBTi recommends that investments in verified mitigation outcomes be prioritised according to characteristics that maximise climate impact and deliver social and environmental co-benefits, while leaving companies free to choose the projects they support. It also sets out a number of high-integrity criteria to ensure that supported outcomes meet minimum governance, transparency, and additionality requirements and include measures to avoid reversals and prevent unintended negative social and environmental impacts.
What is now a voluntary recognition programme will become a requirement for companies with net-zero targets.
From 2035, organisations "shall support eligible carbon removals equal to at least 1% of ongoing scope 1, scope 2, and scope 3 emissions, including a defined and increasing share of long-lived removals." The emissions covered should also "rise linearly to 100% by the company's net-zero target year, and no later than 2050."
The SBTi recognises two types of carbon removals:
In other words, companies with net-zero targets should invest in an increasing share of carbon removal activities that store CO₂ over the long term, gradually transitioning away from emissions avoidance activities. By establishing these requirements, the SBTi creates a system in which carbon removals become an essential component of decarbonisation—a necessary complement to reducing emissions in the effort to mitigate climate change.
Keep in mind that the SBTi will issue a Call for Evidence to assess whether short-lived removals can provide climate benefits comparable to those of long-lived removals. The criteria for this requirement will be reviewed before it comes into effect in the next major revision of the standard, Version 3.0.
Even after doing everything in their power to curb GHG emissions, companies will likely still produce some emissions that cannot be abated because of technological limitations or the nature of their industry. For net zero to be achieved, those residual GHG emissions must be neutralised.
The SBTi states: "At the net-zero target year and thereafter, companies shall reduce their scope 1, scope 2, and scope 3 emissions to zero or residual levels, and neutralize all residual emissions using eligible carbon removals." This means that companies have an ongoing obligation to compensate for unavoidable emissions for as long as they continue to produce them.
This is crucial. Net zero is not a finish line but a state to achieve and maintain. Once companies have reached net zero, they must continue working to stay there.
Companies sourcing credits under the Corporate Net-Zero Standard V2.0 should consider a number of quality criteria, including:
Ecohz provideshigh-quality carbon removal credits sourced from a range of countries and standards. Our team will be happy to advise you on the credits that best align with your company's climate goals and connect you with the removal projects that are most relevant to your operations. With more than 20 years of experience in the renewable energy market, we tailor sustainability solutions to your priorities, budget, and needs.