SBTI’s interim CDR target option welcomed but Scope 3 omission disappoints

Limiting carbon dioxide removal use to Scope 1 emissions under the Science Based Targets initiative's proposed Corporate Net Zero Standard (version 2) hits demand for CDR projects just when the market needs support, carbon sector experts said.

The Science Based Targets initiative published an initial draft of its revised Corporate Net-Zero Standard for public consultation March 18. The consultation runs to June 1.

The draft introduces three options for addressing projected residual emissions via removals between now and a corporate's net-zero target year, but all options are limited to that company's direct (Scope 1) emissions.

"Given that most corporate emissions come from Scope 3, this approach [limiting CDR use to Scope 1] could significantly reduce near-term demand just as the market needs stronger signals to scale," said Simon Bager, co-founder of Copenhagen-based net zero specialist firm Klimate.co.

Companies with net zero commitments, such as banks and pharmaceutical companies, were unlikely to have large residual Scope 1 emissions, while those with large residual emissions (shipping, airlines) "are less able to afford CDRs," Bager told Platts.

"As such, the net effect is that we get less demand for CDR in the interim years than if a mechanism had been put in place to allow those who can afford CDR to contribute more evenly," he said.

A stronger demand signal is critical to securing financing and scaling supply for CDR project developers, Bager added.

"By postponing mandatory removals for most emissions until the net-zero target date, there is a risk that many projects will struggle to secure the off-takes they need to reach commercial viability. Investors and project developers need clear and sustained demand commitments today — not just in 2040 or 2050," he said.

Three options

The first option in the draft requires companies to set near- and long-term removal targets, in addition to abatement targets, to address residual emissions in the net-zero year. The second and third options make interim removal targets optional.

Lukas May, CCO of carbon registry Isometric, said mandatory interim targets could accelerate CDR demand and expand the buyer pool.

"If the current draft [option one] is adopted, SBTi members — most of whom have never bought CDR — will need to retire removal credits worth 0.5% of their Scope 1 emissions by 2030," he said.

This equated to two million mtCO2e of removals – "not a game-changing amount," he said, but meaningful for an industry "that likely faces a five-year wait for government-mandated CDR buying to kick in," for instance via the EU Emissions Trading System, May said.

If options 2 or 3 were chosen, however, some buyers — especially those with net-zero targets before 2050 — may still act early to purchase CDR, but the overall impact will be smaller than with option 1, he said.

Stepping stone

Assuming the SBTi covered about 10% of global emissions, the draft's proposals on interim targets for removals "could create a market for credits of up to $10 billion per year by 2030, and rising over time," said Tommy Ricketts, CEO and co-founder of BeZero Carbon.

Ricketts said the draft would be a stepping stone to a "more rational stance towards using high-quality carbon credits to address residual Scope 2 and 3 emissions."

These made up the vast majority of SBTi-aligned emissions "and equate to billions — not millions — of tonnes of CO2e. We were disappointed to see both broadly ignored in this consultation," he said.

Missed opportunity

Robert Hoglund, co-founder of carbon removals analytics firm CDR.fyi, said the standard "carries some risk of causing more harm than good for the CDR sector."

While the draft would generate some demand from those with residual Scope 1 emissions, "it may reinforce the notion that companies only need to care about Scope 1 and need not scale up CDR for remaining Scope 3 emissions at net zero," he said.

This could hinder efforts within companies without large Scope 1 emissions to advocate for CDR purchases.

Pragmatic framework

SBTi said the draft standard set a "pragmatic framework" enabling more businesses to join the 3,000 entities with net-zero targets or commitments.

It includes a commitment to move to low-carbon electricity by 2040 and provides fresh options for reducing Scope 3 emissions. And instead of setting an emissions reduction target, it provides increased flexibility to set targets for green procurement and revenue generation.

A "transition pathway" would be developed from SBTi's existing standards to Version 2.

"Recognizing the need for urgent climate action, this will ensure that companies continue to feel confident setting targets using the current standard while the development process for V2 continues," SBTi said.

Limited issuance

Calls to extend the use of CDRs come at a time of limited issuance for both nature-based and tech-based carbon removals.

Significant deals include agreements from Microsoft for 1.5 million mtCO2e of nature-based removal credits, while Google has looked to tech-based solutions such as biochar via a 100,000 mtCO2e deal with Indian project developer Varaha.

The Platts Tech-based Carbon Capture Current Year price, which assesses the most competitive and fungible of tech-based carbon credits, was assessed at $150/mtCO2e March 19, a yearly high.

Platts' Natural Carbon Capture Current Year price, which assesses the most internationally fungible carbon credits issued by nature-based projects that remove GHG emissions, was last assessed at $14.95/mtCO2e, having hit a yearly high of $15/mtCO2e on February 6.

Platts is part of S&P Global Commodity Insights.