IETA challenged over carbon credit use for short-term corporate emissions targets

Campaigners suggest carbon credit guidance from International Emissions Trading Association ‘disincentivises emissions reductions’

Following hot on the heels of the debacle around carbon credit guidance from the Science Based Targets initiative, guidelines from the International Emissions Trading Association have come under similar fire from environmental groups for taking the pressure off companies to reduce emissions.

The IETA guidelines for the “high integrity use of carbon credits” recommend companies can use credits to meet interim, or short-to-medium-term, Scope 1, 2 and 3 emissions goals.

According to the guidelines, “carbon credits can play a role in a company’s achievement of its interim targets” and companies “should be able to make robust and accurate claims about these efforts”.

Simon Puleston Jones, managing director at consultancy Emral Carbon, told Sustainable Views carbon credits “should be used in a way that is consistent with the mitigation hierarchy”, a structured approach companies can follow to decarbonise the different parts of their operations.

The mitigation hierarchy suggests companies avoid and reduce emissions before they resort to carbon credits. IETA’s guidance says: “The mitigation hierarchy should be applied to decarbonisation strategies across Scopes 1, 2, and 3.”

“Offsets that certify emission removals will definitely play a role in achieving net zero,” Eric Borremans, head of ESG at Pictet Asset Management, told Sustainable Views. Most companies will need to rely on removals to slash their “residual emissions”, he says, referring to emissions that are difficult to avoid or remove because of technological or financial hurdles.

IETA’s guidance was published on April 16, less than a week after the non-profit SBTi announced plans to recognise carbon credits as a way to abate Scope 3 emissions. This triggered an internal staff revolt and widespread criticism, including from founder member the WWF.

‘Offsetting Scope 3 emissions is a bad idea’

Non-profits NewClimate Institute and Carbon Market Watch were also unhappy with the SBTi decision, and equally critical of IETA’s guidance.

“Companies should not be allowed to use offsets instead of implementing reduction measures within their supply chains,” Juliette de Grandpré, an expert at NewClimate Institute, told Sustainable Views. “Considering the low price of offsets, counting offsets towards Scope 1, 2 and 3 targets will dramatically reduce the incentives for companies to reduce their own emissions, putting global net zero at risk.”

Carbon prices fell steadily in 2023, a trend that has been partly attributed to concerns in the voluntary carbon market over the quality of carbon credits.

“Offsetting Scope 3 emissions is a bad idea,” Carbon Market Watch communications director Khaled Diab told Sustainable Views. “This kind of approach goes against the science, disincentivises emissions reductions, allows laggards to feign ambition and puts effective climate action at risk.”

An IETA spokesperson said: “We understand that there are differing views about the use of carbon credits. Our view remains that the use of carbon credits is an especially valuable decarbonisation tool, helping deliver net zero faster and at lower cost.”

WWF position ‘incompatible’ with IETA guidance

“Offsets cannot be a substitute for reducing emissions from company operations, products and value chains,” the WWF said, in an April 15 response to the SBTi.

“To support the radical transformation we need to see from companies, WWF has long advocated that carbon offsetting needs to be limited in its application to address a small percentage of residual emissions, be bolstered by increased accountability and be pursued as part of a holistic and scientifically defined reduction pathway,” it added.

Carbon Market Watch and NewClimate Institute both said the IETA guidance is incompatible with the WWF’s position.

NewClimate Institute’s de Grandpré echoed the WWF’s view that carbon offsetting should be limited for the purpose of addressing a small percentage of residual emissions, and be used as part of a “scientifically defined reduction pathway”.

“The WWF statement is very explicit on credits not being able to count towards interim Scope 1, 2 and 3 targets,” she said.

The WWF declined to comment, pointing to its April 15 statement.