Using Carbon Credits to Meet Corporate Climate Targets

We analyze the impact of allowing firms to use carbon credits to help meet their science-based emissions targets. The study provides detailed modeling of how many carbon credits would be needed to close the gap to meet corporate emissions targets today and in 2030, how many new firms might sign up to science-based targets and their emissions footprints if allowed to use carbon credits, and the effect of allowing firms to use carbon credits to make new VCMI claims. Key findings include:

1. Across all firms with climate targets, the gap between current emissions and targets is c.400 MtCO2e for Scopes 1 and 2, potentially increasing to around 2 GtCO2e by 2030. For Scope 3 emissions, the gap is even larger, at around 1.4 GtCO2e today and potentially over 7 GtCO2e by 2030.
2. If only firms that are on-track to achieve SBTi Scope 1 and 2 emissions targets can use carbon credits to bridge the Scope 3 gap, this could create a demand for carbon credits of 640 Mt today, potentially increasing to 2.2 GtCO2e by 2030.
3. Carbon credits are often considerably lower cost than internal abatement options. Allowing firms to use carbon credits to meet 50% of their emissions shortfall could incentivize another 1,000 firms to set or commit to science-based targets.
4. If the lower threshold for using carbon credits in the VCMI “silver” claim tier was set at 10% (rather than 20%), this could encourage more firms to adopt this claim tier and participate in the carbon market.