By Jennifer Jenkins, Rubicon Carbon
Earlier this month you may have seen the announcement about our new framework agreement, which commits Rubicon Carbon to providing more than 18 million tonnes of ARR credits to Microsoft over the next couple of decades. As excited as we are about this deal, we are aware that many firms are still not yet ready to invest in the voluntary carbon market (VCM), and a big reason for that reluctance stems from SBTi’s inflexibility around allowing companies to use carbon credits toward their net zero targets. Even though massive investments in nature and climate protection – like the one we just announced – are happening, the carbon credits from these investments still don’t count as progress toward SBTi net zero targets. It’s beyond ironic that something this impactful would be viewed by SBTi as being inadequate for helping a company – and by extension, the world – to meet its net zero goal.
Unfortunately, we believe that the proposed changes outlined in SBTi’s updated Corporate Net Zero Standard (v2.0, CNZSv2) – as published – will do little to change this reluctance on the part of companies, and thus the proposed revision will have little impact on corporate willingness to create and adhere to SBTi targets. In addition, many of the proposals will serve to add complexity to an already-overcomplicated framework.
As a result, while we congratulate SBTi for recognizing that the first draft of the Standard remains unworkable and impractical for even the most ambitious companies, we find that CNZSv2 does not go far enough.
The scale of the finance required to address the climate crisis is enormous, and neither governments nor philanthropies are equipped to provide it. The VCM is a scalable and effective tool, available immediately, that can encourage the private sector to help deliver the climate finance required for humanity to avoid the worst consequences of climate change. As a result, we advocate for a practical, workable, and flexible claims process that provides a clear and unambiguous incentive for corporations to act with the urgency that the situation demands.
SBTi is in a fantastic position to provide that clear and unambiguous signal, and we believe that SBTi does share our goal of encouraging and increasing climate action by everyone, including private sector actors. However, in order to truly unlock climate finance through collective corporate action, we believe SBTi must update the CNZSv2 in three specific ways. With these changes, SBTi’s CNZSv2 will be poised to make a material difference for the planet by creating real incentives for corporations to get – and stay – involved.
Our recommendations relate to the claims that companies may make about their progress toward decarbonization. Without a clear and flexible claims structure, there is virtually no incentive for companies to engage with SBTi and to set net zero targets in the first place. Remember that setting a target is entirely voluntary. If there is confusion about what claims can be made and a lack of flexibility in how to achieve those claims, the alternative is always for companies to sit back and do nothing. If we listen to science, we will hear that action now is more impactful than action later. Let’s get everyone off the sidelines and give them incentives for more – not less – investment in high quality carbon projects.
Below is a brief explanation of the three key issues and our position.
- Do not limit the use of credits – in any part of the framework – to permanent removals only.
The climate crisis is urgent and we simply can’t wait for novel CDR technologies to become affordable before we begin to act on climate. Let’s make it as accessible as possible for companies to act right now.
We urge that the use of credits for any purpose not be limited to removals only, and especially not to removals claiming to have a lifespan exceeding 100 years.
In addition to the need for quick action, the rationale for this position is threefold. First, in order to reach global net zero at all, we must incentivize the protection of nature in the near term, and the best way to accomplish this is through existing and available market mechanisms like carbon credits. Every tonne that we emit today moves us closer to overshoot, with its accompanying warming effect and the risk of reaching irreversible tipping points. Emissions reductions today are more valuable than emissions reductions tomorrow, so it’s important that we use all of the available options in the near term. That means investing in nature protection today.
Second, there is no guarantee that the engineered and more novel CDR technologies will ever be available at scale, at an affordable price point, or in a timely fashion. Let’s not put all of our eggs in the as-yet-unproven “permanent CDR” basket. And frankly, even if we did have all the removal tonnes we need right now, we would still want to invest in nature protection, for all the other important benefits nature provides.
Third, limiting the use of carbon credits to removals only takes a whole class of other, extremely effective solutions off the table. Many superpollutant elimination projects, for example, have impeccable quality and are reasonably priced, and their impact – especially when they involve destroying molecules with high global warming potential (GWP) – is permanent. Even though these are not carbon removal and storage technologies, tonne for tonne their impact on the atmosphere is the same. Let’s not box them out.
- Recognize companies that have achieved neutralization of their ongoing emissions in all scopes by supporting “carbon neutral” claims for firms that are working to decarbonize their operations.
In CNZv2, SBTi suggests that it might recognize — in some way — firms that are using carbon credits to hold themselves accountable for their ongoing emissions. We think this is a fantastic idea. Essentially, this action amounts to a firm “taxing” itself for its emissions entering the atmosphere: for every tonne in its inventory, the firm purchases a credit that can be used to “compensate” for that emission.
SBTi does not explain precisely how they expect to create this recognition, and we have some suggestions. A “carbon-neutral” designation already exists, and it’s quite recognizable by market participants today. ISO, for example, in November 2023 published a “carbon neutral” standard (ISO 14068) that can be used by firms seeking to make such a claim. VCMI’s Carbon Integrity Claim is functionally the same thing – making a VCMI claim involves purchasing credits annually, in proportion to the firm’s ongoing inventory.
We urge SBTi to lean into carbon neutral claims for firms that do the difficult work of holding themselves accountable for the emissions that they produce. Doing this would be a simple, clear, and accessible way to incentivize and recognize firms that are going above and beyond.
- Allow forward-thinking and ambitious companies to make progress toward their targets in all scopes by purchasing credits and certificates as offsets.
SBTi absolutely must provide additional flexibility for companies to use high-quality credits to help meet their targets. We recognize this is a controversial idea for SBTi and we fully understand that critics will say, “We want companies to get their own house in order first! Companies must do the hard work to decarbonize.”
Of course we agree. Companies absolutely must do the hard work to decarbonize, and the number of firms that have signed up for SBTi targets – even though many of them don’t yet know how they’re going to meet those targets – is evidence that there is substantial interest in decarbonization in all parts of the corporate sector. But if you’re trying to run a business in the real world, “just do the hard work” is not that simple. In many cases, the technology simply doesn’t yet exist to replace a particular process with a fossil-free option, or maybe it’s available at a pilot scale but is not yet cost-effective. Or there might be barriers to carrying out a well-formulated plan – a permit delay, for example, or a lack of available renewables on the grid in a particular geography.
In essence, the act of setting a long-term target is an act of faith on the part of company management. Once the target is set, the company is strongly motivated to meet that target. If there is little flexibility for the firm in how it might meet its net zero target, management will simply decide not to engage – and then we’re all worse off. Without flexibility, well-intentioned companies will simply choose to abandon their net zero strategies when circumstances – often beyond their control – prevent them from meeting their goals.
And remember: as long as companies use high-quality credits, we need not worry about aggregate climate impact because the atmosphere doesn’t care where the reductions or removals take place. The VCM is a classic market mechanism, funneling capital to the least costly solutions first. Therefore, using carbon credits to reduce emissions is actually the most economically efficient option, achieving the most impact per dollar for the planet.
The bottom line is that companies need flexibility. If we box them into one particular path, especially if that path is risky and potentially very expensive, we’re not going to get the climate action we need. Climate leadership cannot be built on rigidity: rigidity does not equate to integrity and transparency, and it certainly will not lead to greater uptake and impact.
Our bottom line is this: if SBTi provides a framework that enables multiple paths toward climate claims, the organization will encourage more climate action. If, on the other hand, SBTi provides a rigid framework, the outcome will be less climate action. A more inclusive, flexible standard will not weaken ambition—it will unlock it.
Jennifer Jenkins is Chief Science Officer at Rubicon Carbon.
Any opinions expressed in this commentary reflect the views of the authors and not of Carbon Pulse.
