Criteria Draft for Public Consultation
The SBTi released its Net Zero Criteria Draft for Public Consultation on January 28, 2021, outlining its proposed criteria for setting science-based net zero targets in the Corporate Sector. The Criteria Draft is open for public comment until February 26, 2021. To submit feedback to SBTi on the Criteria Draft, follow the link to their Survey.
Anthesis Senior Consultant, Justin Imiola provides a summary of the Criteria Draft here.
Building on the “Foundations” paper released in September 2020, the Science-Based Targets Initiative (SBTi) has released its Net Zero Criteria Draft for Public Consultation. While the “Foundations” paper provides general recommendations and guiding principles, the criteria drills down into the specific requirements that must be met in setting a science-based net zero target. The criteria are organized into four chapters: 1) General Criteria, 2) Net Zero Target Criteria, 3) Interim Target Criteria, and 4) Communications, Claims, and Validity. Public consultation is open through February 26, 2021 with finalized criteria expected in April 2021. A validation protocol and detailed guidance are to be developed and released later in 2021. Separate criteria and guidance are expected to be released for certain sectors, including financial institutions and land-intensive companies.
Three Components of Net Zero Target Criteria
The Criteria Draft outlines three distinct components contributing to a science-based net zero target.
- The Net Zero Target: the target year for where abatement and neutralization measures result in net zero greenhouse gas (GHG) emissions across a company’s value chain. This target year must be no later than 2050.
- Interim Science-Based Targets: If the Net Zero Target is greater than [10 or 15] years from the baseline year, interim Science-based Targets must be set, ranging from 5 to [10 or 15] years in duration.
- Optional Compensation: SBTi encourages compensation measures. However, compensation cannot be used to meet the net zero target.
- Abatement: reductions in emissions within a company’s value chain
- Neutralization: permanent removal of carbon from the atmosphere
- Compensation: measures taken to reduce or remove emissions outside of a company’s value chain. Compensation does not contribute to meeting a net zero target
- Residual Emissions: emissions sources that remain unabated at the time the net zero target is reached
The Proposed Criteria
Setting a net zero target is no small task, requiring abatement and neutralization of residual emissions within a company’s value chain.
The criteria require emissions in the abatement boundary for net zero targets (Scopes 1, 2, and 3) to be reduced by an amount consistent with reaching global net zero in 1.5°C-aligned scenarios. In essence, if gross global emissions need to be reduced by 90% to limit warming to 1.5°C, then the company must set its net zero target to reduce its emissions by 90% between the selected base year and net zero target year. This requirement applies to both absolute contraction and intensity convergence methods. For Scopes 1 and 2, the criterion remains unchanged from setting SBTs, in that 95% of the emissions in the abatement boundary must be covered. However, there remains an open question surrounding the boundary of Scope 3 emissions. Currently, there are three versions of this criterion proposed for consideration:
- Version A: cover at least 95% of total Scope 3 emissions.
- Version B: cover at least 67% of total Scope 3 emissions, with additional sector-specific requirements for activities that must be included in the target boundary.
- Version C: cover at least 95% of total emissions in Scopes 1, 2, and 3
In addition to significantly increasing the ambition required, the implications of expanding the Scope 3 emissions boundary could be far-reaching. Further, the decisions made for the net zero target criteria are expected to be integrated into the SBT Criteria in 2022, which will apply to all companies setting SBTs regardless of whether they set a net zero target.
Additional questions around setting interim Science-based Targets abound. Key questions include whether to restrict abatement for Scope 1 and 2 to levels consistent with 1.5°C warming, whether to change the Scope 3 boundary in line with the net zero target, and whether to restrict the abatement requirements for Scope 3 to levels consistent with 1.5°C warming.
Determining the Magnitude of Carbon Removals
Factor 1 Volume of unabated emissions in the corresponding year
Factor 2 Global warming potential (GWP) of unabated emissions
Factor 3 Risk of non-permanence associated with planned removal activities
Factor 4 When relevant, additional volume to address potential physical leakage or non-permanence from previous reporting periods.
The criteria are clear on the need to neutralize (i.e., permanently remove) residual emissions at the net zero target year. Further, it is noted that neutralization is not intended to lessen the need for abatement, which must still occur at the science-based rate (e.g., in line with the 1.5°C pathway). Unabated Scope 1, 2, and 3 emissions need to be neutralized:
- Direct (Scope 1) residual emissions must be neutralized with direct removals.
- Indirect residual emissions (Scopes 2 and 3) must be uniquely neutralized using contractual instruments, which is meant to not require more than one company to remove one single source of emissions. For example, one company’s Scope 3 business travel emissions may be another company’s scope 1 aviation emissions. In this example, only one company would need to neutralize those emissions.
Despite the certainty around the need for neutralization, many questions remain regarding the boundaries and magnitude of neutralization, proximity of the vintage of contractual instruments to neutralization periods, and whether interim neutralization targets should be required. Other considerations are still being weighed due to knowledge gaps, such as the permanence of certain carbon removal technologies, and specifics surrounding implementation details not known at the target-setting date. As such, specific consultation questions have been included in an effort to address these concerns.
“Compensation measures can help deliver positive outcomes beyond a company’s value chain. By directly financing innovative projects and programs, as well as purchasing high-quality carbon credits, companies have the opportunity to support not only climate but also a wide range of co-benefits such as community health, indigenous land tenureship, biodiversity, and food and water security. Direct investment in research and development can also support the rapid learning that is needed in the next decade to unlock nascent climate solutions and scale-up carbon removal.“
The Criteria Draft addresses compensation as an optional activity that does not contribute to achieving a net zero target. However, SBTi does recognize the benefits associated with compensation activities and sees a potential for SBTi to provide recommendations for companies seeking guidance on optional compensation activities. With this in mind, SBTi has included several questions for companies to provide feedback on regarding recommendations for optional compensation measures.
SBTi will incorporate feedback from the public consultation into the Net Zero Target Criteria throughout March 2021 with a final Criteria document expected in April 2021. Following the finalization of this Criteria document, SBTi will release the next set of documents including the net zero validation protocol and guidance documents. These documents are expected to be completed in draft form by the end of June 2021, with another public consultation process taking place throughout July and August 2021. Formal launch of the SBTi Net Zero Standard and supporting resources are expected in November 2021 at the UNFCCC COP26 in Glasgow.
Anthesis will provide further insights on the final Net Zero Target Criteria later this Spring.