Here’s what SBTi’s new net zero draft says about mitigating ongoing emissions (and carbon credits):
SBTi’s net zero standard (v1) has had no requirement for companies to take responsibility for the emissions they’ll continue to emit on the decades-long path to net zero. They’re meant to ratchet these down over time, but there’s been little clear incentive to mitigate what’s left each year.
Given the time value of climate action – any ton of CO2 emissions we avoid today is worth a lot more than a ton we avoid tomorrow – this has been a major miss for the climate.
Today, SBTi released a new draft of its v2.0 net zero standard. Nothing is finalized and there’s more consultation to come. But this is the first draft to propose stronger incentives – and eventually requirements – for companies to take responsibility for ongoing emissions.
Here’s what’s proposed:
- 1. 2028 – 2035 – clear recognition for taking action on ongoing emissions Nothing would be mandatory between now and 2035. But the new draft sets out two tiers of recognition for companies if they voluntarily mitigate some of their ongoing emissions. These tiers are:
- A. Recognized – companies that mitigate at least 1% of their ongoing emissions across Scopes 1-3; They can do so through either of the following: – Apply a carbon price to at least 1% of ongoing emissions and use that budget to support eligible climate action; recommended this be at least $20/ton; OR – Mitigate at least 1% of ongoing Scopes 1-3 emissions via approved, quantified mitigation outcomes expressed in tons CO2e (eg retirement of carbon credits)
- B. Leadership – for companies that mitigate 100% of their ongoing emissions across Scopes 1-3. They must do BOTH of the following: – Apply a carbon price to 100% of ongoing emissions; at least $80/ton, AND – Use that budget to mitigate at least 40% of ongoing emissions via approved, quantified mitigation outcomes expressed in tons CO2e (eg retirement of carbon credits).
- 2. 2035 – net zero year (eg 2050) Starting in 2035, the standard will require action on ongoing emissions. How much and what counts probably won’t be defined until closer to 2035.
- 3. Net zero year and onward (this part isn’t new) This is where the ‘residual emissions’ rules kick in – these aren’t new. Depending on the sector, companies may have up to 10% of ‘residual emissions’ – those for which there is no carbon-free alternative. From their net zero year and onward, companies must neutralize these residual emissions each year via carbon removal (likely tech-based CDR). What kinds of carbon credits would count? It looks like both removals and reductions could count! More on this later.
Note: the notes above are relevant to Category A companies – those that are larger and based in high-income countries. The proposed rules for Cat B companeis are slightly different.