Voluntary Carbon Market Guidelines Overload: Which one to follow?

As an avid enthusiast of carbon markets, you may find yourself overwhelmed by the deluge of news and the multitude of guidelines surrounding the topic. But fret not, dear reader, for we are here to navigate through the labyrinth of guidelines and their implications, empowering you to discern which one best suits your organisation’s needs. Let’s delve into the diverse array of guidelines and unravel their significance, ensuring clarity and informed decision-making.

Several guidelines have emerged in the past year, offering recommendations on the role of carbon offsets in companies’ decarbonization strategies. Those include, EITA, SBTi, VCMI, EU Joint Statement, and 2024 Oxford Net Zero Guiding Principles, to name a few.

In early April, the Science Based Targets initiative (SBTi) made a significant announcement, emphasising that carbon offsets, among other environmental climate attributes, could serve as an additional tool in addressing climate action. They extended their endorsement for the use of offsets to abate Scope 3 emissions, provided that the principles of mitigation hierarchy are adhered to. This development marks a pivotal moment, as SBTi now aligns with a general consensus among recognized guidelines, stipulating that offsets should complement rather than replace internal decarbonization efforts. Essentially, all guidelines support the utilisation of carbon credits to address unabated emissions after meeting interim targets and to offset residual emissions through removals to achieve net-zero objectives.

However, discrepancies arise among the guidelines regarding the use of carbon offsets before fulfilling internal decarbonization efforts. While SBTi’s guidelines and a joint statement on the Voluntary Carbon Market by certain EU-member states advocate for the use of offsets only after meeting interim targets, the guidelines proposed by the International Emissions Trading Association (IETA) and the Voluntary Carbon Market Integrity (VCMI), specifically for Scope 3 emissions, suggest their concurrent use as an additional mechanism to help companies meet interim targets and maintain progress between assessment years. To grasp this disparity, one must consider an analysis presented by AlliedOffsets at the European Climate Summit hosted by IETA in Florence. Antonia Drummond, Carbon Market Lead at AlliedOffsets, disclosed that over 80% of companies have yet to establish science-based emission reduction targets, and a significant portion of those that have set targets are falling short of meeting them, with Scope 1 and 2 targets missed by 26% and Scope 3 targets by 62% annually.

It’s crucial to underscore that carbon credits should not serve as a substitute for internal decarbonization efforts. Companies must prioritise internal mitigation of greenhouse gas emissions, resorting to carbon credits only to achieve net-zero objectives or to surpass decarbonization goals during interim periods. However, in instances where companies anticipate failing to meet interim targets, the guidelines proposed by IETA and VCMI validate the acquisition of carbon credits to ensure target attainment and sustained progress.

At HeavyFinance, we firmly believe that in the face of the urgent challenge of climate change, adherence to the Paris Agreement is essential and meeting interim targets is of paramount importance.