Efforts to expand the use of carbon credits as a means for companies to offset their greenhouse-gas emissions have stalled, raising concerns that some companies might reconsider or even abandon their net-zero targets. Since the 2015 Paris Agreement, more than half of the world’s largest 2,000 publicly listed companies have pledged to reduce their emissions to net-zero by 2050. However, environmental advocates are increasingly worried that companies are not making enough progress toward these goals.

A key challenge lies in the reliance on carbon offsets, which companies can purchase to compensate for emissions they struggle to reduce directly. These offsets, generated by projects like reforestation or clean energy initiatives, are intended to help companies meet their emissions targets. However, the Science-Based Targets initiative (SBTi), an influential organization that audits corporate emissions targets, has recently expressed doubts about the effectiveness of these offsets. The SBTi’s research indicates that the climate benefits of carbon offsets are often difficult to verify, leading to a delay in its decision on whether to allow their use until 2025.

This development marks a significant shift for the SBTi, which had previously considered expanding the use of offsets. Currently, the SBTi only allows companies to use offsets after they have met their targets by directly reducing emissions. With nearly 6,000 companies using the SBTi to validate their emission targets, and more than 2,000 committed to doing so, the organization’s stance could have far-reaching implications.

Some companies may now be considering scaling back their net-zero ambitions if they are not allowed to use carbon offsets more broadly. Tommy Ricketts, CEO of BeZero Carbon, a carbon-ratings agency, noted that many companies are struggling to meet their targets and may be weighing their options. “There are a lot of companies out there going, ‘we can’t deliver against our targets. We have two options. We look for another way of doing it or we quietly leave the building,'” Ricketts said.

The SBTi has declined to comment on the potential impact of its stance on carbon offsets, stating that its review is ongoing and the current framework will remain unchanged until next year’s revision process is complete. John Lang, who tracks net-zero goals for the Energy & Climate Intelligence Unit, expects that more companies may pare back their near-term emission targets in response to the SBTi’s position. However, he suggests that this recalibration could lead to a focus on more realistic and actionable steps to reduce emissions.

Thomas Day, an analyst at the NewClimate Institute, argues that companies scaling back their efforts are often abandoning unsubstantiated ambitions rather than meaningful action. This sentiment is echoed by South Pole CEO Daniel Klier, who warns that the lack of near-term clarity on carbon offset validation could lead to stagnation in the carbon offset market, potentially delaying crucial investments in nature and carbon removal projects.

As the debate over the role of carbon offsets continues, the broader market for these credits could either expand significantly or face challenges if companies and regulators fail to reach a consensus on their effectiveness and usage.

(Adapted from Reuters.com)