Recent challenges in expanding the use of carbon credits for offsetting greenhouse gas emissions have raised concerns that some companies might reconsider or even abandon their climate goals.
More than half of the world’s 2,000 largest publicly listed companies have committed to net-zero emissions by 2050 since the Paris Agreement in 2015.
However, environmental advocates are increasingly worried that companies are falling behind on these commitments, citing delays in clean technology implementation and insufficient government support for the transition away from fossil fuels.
Carbon Offsets: A Controversial Solution
Proponents of carbon offsets argue that these mechanisms can help companies bridge the gap when their efforts to directly reduce emissions fall short.
Companies can purchase offsets generated by projects like reforestation or switching to cleaner fuels, which theoretically compensate for their emissions.
Science-Based Targets Initiative (SBTi) Raises Concerns
The Science-Based Targets initiative (SBTi), a non-profit organization that validates corporate emissions targets, has recently dealt a significant blow to the expansion of carbon offset usage.
The SBTi’s research concluded that carbon offsets are often ineffective in reducing emissions due to difficulties in verifying their climate benefits.
As a result, the organization has postponed its final decision on allowing companies to use offsets to meet their emission targets until 2025.
This represents a major shift for the SBTi, which previously expressed a desire to allow greater use of offsets in target-setting. Currently, companies can only use offsets after achieving their targets through direct emission reductions.
Impact on Corporate Climate Ambitions
The SBTi’s stance on carbon offsets has led to concerns that companies might scale back their net-zero ambitions if they cannot rely on offsets to a greater extent.
Tommy Ricketts, CEO of carbon-ratings agency BeZero Carbon, noted that some companies may struggle to achieve their targets without offsets and might quietly abandon their commitments.
Barriers to Setting Net-Zero Plans
An SBTi survey revealed that reducing emissions from a company’s supply chain, known as Scope 3 emissions, is the biggest hurdle to establishing a net-zero plan.
Scope 3 emissions often constitute the largest part of a company’s carbon footprint and are difficult to control due to limited influence over vendors and customers.
Uncertain Future for Carbon Offsets Market
The lack of near-term clarity on the validation of carbon offsets could lead to market stagnation.
Daniel Klier, CEO of South Pole, a carbon offset broker and project developer, highlighted that the delay in SBTi guidelines until 2025 could deter investment in carbon offset projects.
Potential for Recalibrated Targets
John Lang, who tracks net-zero goals for the Energy & Climate Intelligence Unit, predicts that more companies might revise their near-term emission targets due to the SBTi’s position on carbon offsets.
However, he suggests they may focus more on realistic actions to cut emissions.
Focus on Realistic Action
Thomas Day, an analyst at the NewClimate Institute, observed that companies scaling back their efforts are often simply abandoning unsubstantiated “lofty-sounding ambitions.”
Key takeaways:
- Stalled efforts to expand the use of carbon offsets are raising concerns about corporate commitment to climate goals
- The SBTi’s skepticism about the effectiveness of offsets has led to a delay in their wider acceptance
- Companies may scale back their net-zero ambitions or focus more on realistic actions to cut emissions
- Lack of clarity on validation could stagnate the carbon offset market