SBTi Corporate Net-Zero Standard 2.0: What does it really mean for the carbon credit market?

Introduction

The Science-Based Targets initiative (SBTi) has recently released the updated Corporate Net-Zero Standard (CNZS) 2.0 draft for the second round of public consultation. SBTi is one of the most widely adopted voluntary net-zero standards, with nearly 2,250 companies having SBTi net-zero targets and almost 12,000 with targets or commitments. As such, they are one of the most influential organisations in corporate decarbonisation.

In recent years, several high-profile corporations have dropped out of the standard and withdrawn their targets, raising questions about the standard's wider usability. There have also been issues around some of the highest-emitting industries not being able to participate, such as the oil and gas sector, whose tailored standard has been placed on hold. Therefore, this standard marks a significant milestone for the momentum of the SBTi, particularly in the context of increasing government regulation of corporate climate action and the imminent publication of the International Organisation for Standardisation’s own net-zero standard (ISO 14060).

This article examines the key elements of the updated CNZS in relation to carbon credits. It explains the implications of the draft for the carbon credit market and outlines the key views BeZero will express in its response to the consultation, which is due by December 8, 2025.

The role of carbon credits under CNZS 2.0

Where carbon credits have a role in corporate net-zero:

• Taking responsibility for ongoing emissions. SBTi users can voluntarily tackle ongoing emissions via an Ongoing Emissions Responsibility (OER) framework across all Scopes 1, 2 and 3, which is reflected in new labels:

  • ‘Recognised’ - for corporates that take responsibility for at least 1% of their ongoing emissions with ex-post mitigation impact contributions (including all types of carbon credit, both reduction and removal) or apply and reinvest a carbon price of USD 20/tonne on covered emissions.

  • ‘Leadership’ - for corporates that take responsibility for 100% of their ongoing emissions with a minimum carbon price of USD 80/tonne. This should be used to purchase credits accounting for at least 40% of their ongoing emissions, with the remaining funds used to finance other climate action (e.g. via R&D).

• Scaling removals to neutralise residual emissions in the net-zero target year. Large companies globally, and medium-sized companies in developed economies, will be required to take responsibility for a percentage of their ongoing emissions from 2035, to be determined through this consultation or future consultations. This will rise to 100% of residual emissions in the net-zero target year and include an increase in the proportion to be accounted for with 'long-lived' (i.e., permanent) removals. The illustrative example provided in the SBTi’s documentation shows a rise in the proportion of long-lived removals from 17% to 41% over the period to 2050.

Where carbon credits do not have a role in corporate net-zero:

• Towards achieving the net-zero targets established under the standard. The revised draft does not introduce flexibility for carbon credits to be used towards the core emissions reduction target, maintaining a separate role for them. This is a long-held position of the SBTi and does not represent a change in the new standard.

• Near-term removal targets. The SBTi’s previous draft of the CNZS 2.0 included options to introduce near and long-term removal targets to scale removal supply to be sufficient for neutralisation in the net-zero year and beyond. This would have required (or at least guided) some companies to immediately start procuring a small, but growing, proportion of removal credits. This language is absent from the new draft, with the scaling of removals incorporated into the OER framework from 2035 instead, with no requirement to use removals in the immediate term.

• In mitigating the impact of underachieving against a target. The initial CNZS 2.0 draft consulted on methods to address target shortfalls and underperformance via the use of removals. This wasn’t intended to replace the achievement of the target itself, but to provide flexibility in the short term when corporate emissions overshot the target. The proposed option allowed for the purchase of high-durability removals to compensate for the additional emissions. However, this is absent from the updated standard.

What could this mean for the carbon credit market?

Almost 12,000 companies are signed up to the SBTi, including many of the largest corporations globally. While no official estimates are available, it’s plausible that the total scope 1, 2 and 3 emissions coverage of SBTi-aligned companies is larger than 10 gigatonnes. Hence, if all SBTi-aligned organisations signed up to the ‘Recognised’ OER tier at the minimum 1% level, this implies demand for carbon credits totalling 100 million credits per annum or more. For comparison, in recent years, total carbon credit retirements across all major voluntary standards have totalled around 200 million credits per annum.

It must be noted, however, that this significant potential boost to global carbon credit demand relies on uptake of the OER framework, which remains voluntary for all SBTi-aligned companies until 2035 under the draft standard. Whether a voluntary recognition framework is sufficient to change the immediate strategy of companies that are currently not actively procuring carbon credits remains to be seen. We can say with near certainty that many SBTi-aligned companies will continue to follow a short-term net-zero strategy that excludes carbon credits.

A further important consideration for the carbon credit market is the type of credits that the SBTi’s new framework permits. In the voluntary OER period up to 2035, all credit types will be recognised. However, in the post-2035 period, when OER becomes mandatory for some companies, there will be more restrictions. One interpretation of the current draft is that, post-2035, only removal credits will be recognised (though, as discussed in the section below, this is ambiguous). At a minimum, there will be a requirement to transition to 100% removals by 2050 or earlier, with a growing proportion of these removals being long-lived (again, as discussed below, the definition of long-lived is ambiguous).

BeZero’s view on the latest CNZS 2.0

We will be responding to the consultation on the latest draft of the CNZS 2.0, and would encourage others to do likewise. The key points we will be making in our response can be split into two categories: (1) Where credits can be used, and (2) The type of credits that can be used within corporate net-zero strategies.

Where credits can be used:

• The SBTi's shift in narrative towards the OER framework, rather than the previous guidance on Beyond Value Chain Mitigation (BVCM), is a step in the right direction. This is a much clearer framing, which is more meaningful to a broader audience. Simplifying the framework to cover emissions across all scopes is also a positive and ambitious step (compared with the previous draft, where removals targets were proposed on scope 1 only). The OER framework steers corporates to simultaneously decarbonise and use credits, supporting more climate action sooner. 

• The OER targets should be more effectively calibrated and incentivised to maximise the number of corporates that deliver ambitious, additional voluntary climate action. We’d like to see the SBTi looking carefully at options such as raising the minimum threshold beyond 1% of ongoing emissions for certain sectors and introducing a middle tier between “Recognised” and “Leader” that could be more attractive for some companies. Critically, we’d like to see the SBTi work with governments to explore meaningful incentives that could be introduced for companies that voluntarily follow the OER framework. The SBTi has included a requirement for organisations to report on OER and provide justification if they have decided not to participate, which could provide a stronger incentive if this information is made publicly available.

• With guardrails, carbon credits should be able to be used to address the underperformance of targets. We acknowledge why the SBTi is cautious on this issue, as it is imperative that internal decarbonisation is prioritised and incentives to reduce emissions remain strong as the key priority. However, there are clear benefits from a global emissions perspective to building requirements into the standard that companies must take responsibility for missing their targets through purchasing high-integrity credits. Corporates that miss their targets currently have minimal recourse to address this. In this regard, the current design of the standard leads to contradictions: if a company misses its target, it is precluded from recognition under the OER, hence has no incentive to use carbon credits to address ongoing emissions. In reality, companies that miss their emissions reduction targets should be incentivised to take more responsibility for their ongoing emissions, not less. This is particularly important in a context where emissions from data centres are expected to double by 2030 and could limit many large companies from meeting near-term targets.

• Greater clarity is needed on the role of Environmental Attribute Certificates (EACs) and insetting in addressing Scope 3 emissions. The SBTi is consulting on the role of energy and commodity EACs in addressing Scope 3 emissions, but has excluded carbon credits from this discussion. This implies that EACs carry an acceptable level of risk while carbon credits (even long-lived removals) are deemed too risky. The previous draft also included a clearer articulation of the role for insetting, which is absent now. Clarity on how and where insetting plays a role and why risk-managed removals are excluded from addressing Scope 3 is needed.

• Reintroduce logical guidance to scale removals in the immediate term, creating a sufficient supply for eventual neutralisation. The current draft includes no explicit requirement to scale removals before 2035. Previous draft language on near and long-term removal targets provided logical guidance to encourage investment. The SBTi should introduce language to guide corporates in scaling up the purchase of removals between now and 2035, even at a very small scale. If this is not initiated, it risks the removal industry failing to achieve sufficient scale by 2035 and beyond.

The type of credits that can be used:

• The integrity principles proposed by SBTi (Annexe E of the standard) are reasonable; carbon ratings complement them as a metric to substantiate and monitor the performance of credits on an ongoing basis. The included integrity principles provide a strong starting point, but do not include a method to demonstrate alignment with the principles. Carbon credit ratings provide a fungible metric to illustrate the likelihood of a credit achieving its carbon claim. Ratings have been recognised in existing integrity principles designed by governments, including the newly launched Coalition to Grow Carbon Markets, developed by the UK, Singapore, Kenya, France and Panama and endorsed by many others. The SBTi should align with these government-endorsed principles. Encouraging third-party assurance for carbon credits via independent ratings would align the OER element of the standard with the wider requirements of CNZS for third-party assurance of targets.

• Transparent disclosure is essential to the trust in and success of the standard and, for carbon credits, must extend to the project level. The current draft requires disclosure of the volumes of credits purchased alongside other information listed in the integrity principles, such as project and activity type. The guidance should be extended to reflect best practices such as those devised under the G20 Carbon Credit Data Disclosure Model, and include project-specific details to enable independent investigation and require the disclosure of independent project-level ratings. Meeting this level of disclosure will allow greater transparency and comparability between companies and encourage higher integrity climate action.

• A role for avoidance and reduction credits alongside removals is welcomed, but the ambiguity of the acceptability of credits after 2035 must be addressed. The draft allows a mixture of avoidance, reduction, and removal credits to be used under the OER framework up to 2035. This has the potential to drive funding to a range of key project types, such as avoided deforestation, which will remain important for decades to come. Post-2035, a minimum proportion of long-lived removals is introduced, with the remaining obligation met through a combination of long-lived and short-lived removals, transitioning to a greater long-lived share over time. However, supplementary guidance on OER suggests that a mixture of reductions and removals will be permitted after 2035. The issue lies in the ambiguity regarding what is referenced in the standard and the supplementary guidance. Further clarity should be provided on the requirement for all credits to be removals after 2035, and on definitions of long-lived and short-lived removals. The SBTi must carefully consider the impact of their guidance, recognising the role that a mixed portfolio of removal, reduction and avoidance credits can play. 

• Requirements for how and which credits can be used should avoid abrupt changes and support the development of a robust market. Whether referencing the proportion of long-lived removals required, the percentage of emissions covered or the introduction of corresponding adjustments for residual emission neutralisation, efforts should be made to scale the capacity over time to avoid substantial market disruptions. Binary cut-offs in the type of credits allowed could have significant implications for developers, and inhibit investment.

BeZero will raise these points in our response to the consultation, which is due on 8th December 2025. If you wish to discuss this further, please do not hesitate to reach out to commercial@bezerocarbon.com