Act Beyond Value Chain

Purchasing carbon credits on the voluntary carbon market (VCM) can support voluntary mitigation beyond your value chain.

A carbon credit is a certificate representing one metric ton of carbon dioxide equivalent that is either prevented from being emitted (emissions avoidance/ reduction) or removed from the atmosphere, as the result of a carbon-reduction project.

Carbon credits should represent emission reductions or removals that are real and measurable (i.e. realized and not projected or planned), permanent (i.e. not reversed), additional (i.e. would not have been realized without the project, and the project itself would not have happened without the proceeds from the sale of credits), independently verified (i.e. verified by an accredited, independent third-party), as well as unique and traceable (i.e. not double counted and transparently tracked in a public registry).

Voluntary carbon credits can support several use cases for businesses:

A. Counterbalancing remaining emissions. While prioritizing emission reduction within the value chain, businesses may purchase voluntary carbon credits to counterbalance their annually remaining emissions during the transition phase. This case is aligned with the SBTI Net Zero Standard and depending on the quantity of credits purchased would open the possibility of making a Carbon Integrity Claim supported by VCMI.

B. Neutralization at net-zero. Once businesses reach net-zero status, in which their carbon emissions cannot be further reduced, they are required by SBTi to remove an equivalent amount of carbon to residual emissions. In addition to in-value chain removal activities, businesses can use removal carbon credits to neutralize residual emissions. Although SBTi has not yet issued guidance on what type of removals will be acceptable, it is likely that technology-based solutions (TbS) will generally play a central role due to greater permanence compared to NCS. Though, this may differ for some sectors such as FLAG (Forestry, Land Use, Agriculture) where NCS removals are and will remain a critical part of FLAG sector decarbonization.

C. Temporarily close Scope 3 reduction target gap. A company could make limited use of high-quality carbon credits to close the gap between its estimated scope 3 greenhouse gas (GHG) emission reduction target level, and its current scope 3 emissions in a given year, as long as it has already taken other steps to reduce current emissions (i). Note that this use case is still being tested as part of VCMI’s Scope 3 Flexibility Claim Road testing process.

D. Compliance market: In limited situations, VCM credits are accepted by compliance markets. For example, certain emission trading schemes (e.g., US California Cap-and-Trade Program) allow businesses to purchase voluntary carbon credits to fulfil part of their compliance obligations. The allowance cap is often set low (e.g., 5-10%) to limit voluntary carbon credit use.

An additional potential use case is for companies to use voluntary carbon credits to address historical emissions. This may not be feasible for many companies and must only be seen as an addition to the use cases above. There are no voluntary standards or recognised methodologies to quantify historical emissions at present.

This is a complex and rapidly evolving space which can sometimes present challenges, therefore in these steps, you will be guided through the demand-and supply-side risks associated with the integration of the voluntary carbon market into your climate strategy and provided with resources to support the successful navigation of the procurement process for carbon credits.

i. This use case is supported by VCMI's new Scope 3 Flexibility Claim – launched as a beta version on November 28th 2023 as a standalone document made publicly available through VCMI's website. The new claim permits a company to make limited use of high-quality carbon credits to close the gap between its estimated scope 3 greenhouse gas (GHG) emission reduction target level, and its current scope 3 emissions in a given year, as long as it has already taken other steps to reduce current emissions.