Are We Penalizing Progress?
London, 31st July 2024
Are We Penalizing Progress?
Yesterday, SBTi published its SBTi Corporate Net-Zero Standard review, including a discussion paper on potential uses for carbon credits.
I would suggest that SBTi, and others who discourage using voluntary carbon credits as a potential initial net-zero strategy, risk penalizing progress that the market sorely needs. While I understand the argument that internal decarbonization should be a first step in the journey, this concept of the perfect sequence has led to inaction. It may not always be practical for a company to reduce emissions immediately. It is always practical to use credits. Thus, we should promote concurrent activity over consecutive. SBTi’s approach overlooks some of the practical benefits and strategic necessities of investing in high integrity voluntary carbon credits, including:
1. Immediate Emission Reductions
Voluntary carbon credits provide an immediate mechanism for companies to offset some of their emissions. Long-term strategies, like transitioning to renewable energy or overhauling industrial practices, require significant time and investment. Carbon credits, on the other hand, allow for quick action, serving as a bridge while companies develop and implement sustainable practices. Penalizing this rapid redistribution of finance towards climate action could inadvertently slow the overall pace of global emissions reductions.
2. Overcoming Financial and Technological Constraints
40% of small and medium-sized enterprises (SMEs) name insufficient budgets and high costs as major blockers to achieving net zero, with many other companies facing similar financial and technological barriers. Voluntary carbon credits offer a cost-effective option for companies to participate in global carbon reduction efforts without compromising financial stability. Penalizing the use of such credits could disproportionately disadvantage smaller companies, stifling broader participation in climate action.
3. Supporting Global Decarbonization
The voluntary carbon market has the potential to remove 2.6 billion tonnes of emissions by 2030 through incentivizing emission reduction projects, particularly in developing countries. By purchasing voluntary carbon credits, companies can invest in decarbonization projects worldwide – from reforestation to renewable energy installations. Penalizing this market engagement undermines the growth of a critical mechanism for global carbon reduction.
While SBTi and similar organizations’ intent to ensure genuine emission reductions is commendable, it risks being counterproductive.
Voluntary carbon credits should be recognized as a valuable tool within a broader arsenal, enabling companies to contribute meaningfully to global emission reduction efforts. We seem to collectively fail to take account of the fact that the market, for the time being at least, is voluntary. We need to permit companies to engage in carbon reduction in a manner that permits them to realize some economic value from doing so. That value may come from postponing the more costly (but necessary) action while still doing “the right thing”.
Immediate action, financial pragmatism, market support, and comprehensive strategies are all critical in countering the climate emergency.
Media Contact
Scott Eaton, Chief Executive Officer at Carbonplace