Webinar Q&A: COP27 – key takeaways for companies

The Compensate webinar, COP27 – key takeaways for companies, was arranged in November 2022. In this Q&A, we answer the questions we received during the webinar. If you missed the webinar you can download the webinar recording . 

"No deforestation" gets me to CO2e-certificates. I know that CO2-markets and the issue of double counting was already addressed back at COP26. However, I wonder if it has still been a topic this time at COP27. Has there been a discussion on how to regulate/control the generation of certificates to avoid double counting? One of the crucial outcomes of COP27 was the decision to establish a new type of carbon credit known as a mitigation contribution under Article 6.4 – providing clarity on the issues of double claiming and corresponding adjustment. This is a clear signal that mitigation contribution units cannot be used for making offset claims. Now, it's time for the voluntary carbon market and the ongoing initiatives working on reforming the market – The Integrity Council for the Voluntary Carbon Market (ICVCM) and VCMI – to take a clear stance on the difference between offset claims and mitigation contributions. Buyers of carbon credits should be aware of the difference, making an informed decision when purchasing offsets. Net zero and carbon neutrality claims will require corresponding adjustment to avoid double claiming.

How does carbon offsetting work for net zero target as carbon offsets don't account for emissions reduction? In line with the SBTi net Zero Standard, no net zero claim can be made until emission reductions reach a certain level. In the case of SBTi that means reaching “deep decarbonization of 90-95% before 2050”. When that point is achieved, companies need to reach net zero by “neutralizing” the remaining unabatable emissions through carbon removal. Even though the net zero claim cannot be made until companies have reached deep decarbonization, companies can and should take responsibility for their current emissions. In most cases, this means offsetting those emissions that cannot be avoided. Offsetting must be done with carbon projects that have a true climate impact. Does the tendency towards no double claiming mean that corresponding adjustments will be necessary for the VCM? For making a credible offset claim, double counting must be avoided. The decision at COP27 to establish a new type of carbon credit known as a mitigation contribution under Article 6.4 provides clarity on the issues of double claiming and corresponding adjustment. This also sends a clear signal to the voluntary carbon market that double counted credits called “mitigation contribution units” cannot be used for making offset claims. Alternatively, companies can choose to use double counted credits to make contribution claims where they support countries reaching their NDCs. Does SBTi agree with carbon offsetting? According to the SBTi, a company is only considered to have reached net zero when it has achieved its long-term science-based target. Most companies are required to have long-term targets with emission reductions of at least 90-95% by 2050. At that point, a company must use carbon removals to neutralize any limited emissions that cannot yet be eliminated. Even though the net zero claim cannot be made until companies have reached deep decarbonization, companies can and should take responsibility for their current emissions. In most cases, this means offsetting those emissions that cannot be avoided. In addition, the SBTi recommends companies go further by making investments outside their science-based targets called “beyond value chain mitigation” , for example, by purchasing carbon offsets. Is SBTi going to take into consideration that the 1.5 ambition is slipping away? The goal is still to keep the 1.5 ambition alive and not to adapt or give up. When you say carbon neutral goal in line with climate science and 1.5 targets, this is talking about when you need to be carbon neutral and what the trajectory of reduction needs to be to align? Yes, that is right. For more information, please take a look at our white paper - Getting the claims right . The UN High Level Expert Group had a detailed recommendation (on page 20) that implies that only permanent removals (not avoidance) credits should be used. Full quote below. This surprised me - does this, to you, imply that only removal credits should be used in the near-term for organizations that want to make carbon neutrality claims? Or is this just reinforcing SBTi messaging re: the formal net zero pathway and is not referring to carbon neutrality claims at all? Non-state actors who choose to purchase voluntary carbon credits for permanent removals to counterbalance residual emissions or annual unabated emissions beyond their net zero pathways must use credits associated with a credibly governed standard-setting body that has the highest environmental integrity with attention to positive social and economic outcomes where the projects or jurisdictional programmes are located. The report is entirely about net-zero commitments, so the focus on permanent removals reinforces the SBTi message. Although the SBTi mandates that only permanent removals are to be used to neutralize the emissions, the list of project types accepted includes also many nature-based removal projects such as improved soil and forest management and land restoration, for example, of peatland, terrestrial forests, or mangroves. Do you think that carbon offsetting will become much more expensive and less projects will be available? There is a growing demand for carbon removal projects, because of corporate net-zero commitments for which they can only use removal credits. However, carbon removals are less than 5% of the carbon market today, so in order to meet the growing demand for removals we'll need new high-quality projects. Carbon removal is also more expensive than avoided emissions projects, such as REDD+ or cookstoves. Do we have a timeline on when the corresponding adjustment system will be operational? No timeline yet for implementing corresponding adjustment for the voluntary carbon market, even though countries are already thinking about how to do it. Not confusing, but not true. Not correct that mitigation contribution cannot be used as offsets. It cannot be used for compliance, cause that would need transfer and corresponding adjustment. The contribution Art 6.4. are the same as voluntary carbon market credit, they can be used to compensate voluntarily part of residual emissions in the same time contribute to host country NDC. The claim of a company is not the same as a report of a country. The “mitigation contribution” units under Art 6.4 could be used as beyond value chain mitigation, going beyond companies’ net zero targets, but companies cannot make offset claims. For making a reliable offset claim, companies need to buy credits that are not double counted. This is also in line with the newly published ISO standard for net zero. If double counting occurs, the company only contributes to countries' NDCs. How can there be any control of double claims if there's no mandatory national register for the voluntary market?

Countries are actively working to make it possible as part of implementing a corresponding adjustment for credits sold on the voluntary market. This however will take some time. Where is SBTi on the double claiming issue? Double claiming is not explicitly addressed in the SBTi Net Zero Standard, but a reference is made in the Beyond Value Chain Mitigation section to making a contribution claim when credits are supporting countries achieving their NDCs. Would mitigation units be applied to unconditional NDC only? Or precisely the conditional NDC? Whether it is conditional or unconditional NDC, if double counting occurs, then it's a contribution claim. Will the certification and verification companies (like Verra, Gold Standard) include this new type of credit into their methodologies? This is only related to making a contribution claim and not an offset claim, thus the same methodology for calculating the carbon can be used, just the claim buyers make is different. Hopefully, the standards are going to differentiate double counted credits from the ones which have received a corresponding adjustment, so that the buyers can make informed decisions.

Interested in learning more? Download the webinar recording.