Key takeaways
- Credits can be used to address the gap between Scope 3 targets and actual emissions, the code proposes.
- The global Scope 3 emissions gap is already greater than a gigaton of carbon dioxide equivalent and is expected to grow.
- The code offers companies more flexibility, but risks fracturing the limited consensus on net zero rules.
Companies should be allowed to make limited use of carbon credits to address Scope 3 emissions, a group of sustainability organizations has proposed.
The suggestion runs counter to existing rules from the Science Based Targets initiative (SBTi), the most influential net zero standard-setter in the private sector. The SBTi is also considering loosening its rules on use of credits, which at present it only allows to address residual emissions that remain at the end of a company’s net zero journey. The proposal from the Voluntary Carbon Markets Integrity Initiative (VCMI), however, goes further than those recent proposals.
Like the SBTi, the VCMI insists that companies set science-based targets and prioritize decarbonization of their own emissions. But the VCMI’s Scope 3 Action Code of Practice says that companies can also use high-quality credits to address the Scope 3 “emissions gap,” defined as the difference between a company’s Scope 3 emissions and where those emissions should be if the company were on track to hit its science-based target.
Growing to gigatons
Globally, the total Scope 3 emissions gap is 1.4 billion tons of carbon dioxide equivalent, the VCMI said in a statement announcing its new code — which was backed by the Environmental Defense Fund and the We Mean Business Coalition and welcomed by the U.K. government. That’s equivalent to the combined 2023 emissions of Germany, the U.K. and Italy. It is expected to grow fivefold by 2030.
Companies following the VCMI’s Scope 3 code will not have a free hand to use credits. To align with the code, a company must:
- Disclose its Scope 3 emissions gap and the steps taken to close it.
- Provide details on the barriers it faces in further closing the gap, tactics for overcoming them and the expected timeframe to close it, which must occur no later than 2040.
- Retire high-quality carbon credits in an amount equal to at least its entire gap.
- Limit use of credits. In the simplest mechanism offered by the VCMI, credit volume cannot exceed 25 percent of the company’s Scope 3 emissions in a given year.
Welcome news …
Additional flexibility in addressing Scope 3 emissions is likely to be welcomed by many companies. Scope 3 emissions often make up the majority of company emissions and are the most challenging to control. In a draft update to its net zero standard released in March, the SBTi gave companies more options for setting Scope 3 targets. It also suggested that companies be “recognized” for using credits to address ongoing emissions, but did not specify what this would entail.
… but not for all
By introducing a rival code, the VCMI risks splintering the already limited consensus on the rules companies are meant to follow to hit net zero.
“The VCMI’s intention is not to create divergence, but to offer a pragmatic, high-integrity solution to the difficulty many companies face in reducing scope 3 emissions at the required pace,” the organization wrote in response to questions from Trellis. The initiative also noted that the SBTi appears open to similar use of credits and, in the code itself, recommended that “target-setting frameworks adopt this approach.”
The SBTi did not immediately return a request for comment.
