The SBTi now gives companies an actual reason to buy carbon credits. I keep turning that over, because for years the framework did the opposite.
That flipped on 11 June.
Some context first. Over 11,000 companies have set targets through the Science Based Targets initiative. People argue about the SBTi constantly, but nobody else in this market has anything close to that adoption. So when it rewrites its rules on credits, the demand implications are bigger than any government scheme currently in play.
Version 2.0 of the Corporate Net-Zero Standard introduces something called Ongoing Emissions Responsibility. Three tiers of recognition for buying credits against the emissions you produce on the way to net zero. Engaged covers at least 1% of your footprint. Advanced covers all of Scope 1 and 2 plus enough of the value chain to hit 10%. Leadership prices every tonne you emit at $80 and retires credits against the whole lot.
The detail I’d watch, though, is the declaration. From the first validations in early 2027, every company has to state publicly whether it takes part. Goes on the SBTi dashboard. Saying no means writing an explanation. Think about what that does to a sustainability team’s incentives. The company buying credits used to be the one under scrutiny. Now it’s the one abstaining.
What it costs
Trellis put numbers on the top tier last week using a calculator Supercritical built. Leadership would run Rio Tinto $23 billion a year. Ford, $13 billion. Amazon, $3 billion. Microsoft, $580 million. For the heaviest emitters that’s more than they make. And across the whole sample, exactly two companies on record run an internal carbon price that would even qualify.
Nobody is writing those cheques. Fine. But thousands of companies now have a ladder in front of them and a public position to defend. The first two tiers can be met with retired credits tonne for tonne, or with an internal carbon fee of at least $20 a tonne. Which probably makes $20 the ceiling a rational buyer pays for a credit. Below that, buying tonnes beats paying the fee.
So they’ll buy cheap. But cheap junk under a public declaration is a reputational problem waiting for a journalist to find it, and everyone involved knows that. The credits have to hold up. Which in practice means CCP eligible and highly rated, because ratings are the best proxy we currently have for whether a tonne survives someone actually looking at it. A good demonstration of this is the fact that BeZero Carbon does the diligence for many of the top buyers including Microsoft.
Cheap and defensible. Hold both of those at once and the shelf gets short quickly.
Where I think this goes
The next decade is the decade for technical avoidance. Industrials and methane in particular.
Orphaned and marginal well plugging, refrigerant destruction, industrial methane, N2O abatement, early decommissioning of fossil fuel sites. Measurable in a way most of the market can’t touch, cheap and impactful. The emergency handbrake we need.
Removals run on a different clock
I don’t think removals lost here, though plenty of people in CDR feel that way, and honestly the 2035 start date is slower than the industry deserves. From 2035, large companies must support removals covering 1% of ongoing emissions, rising to 100% by their net-zero year.
2035 sounds far away. It isn’t. Anyone who has actually stood up a removal project knows the timeline: feasibility, design, permitting, financing, first credits, and then the long grind to real volume. A 2035 obligation gets financed in the late 2020s or it doesn’t get met. The standard even counts forward agreements for undelivered removals as eligible spending, which tells you the SBTi understands this too. Companies waiting until 2033 will be shopping in a supply crunch at whatever the price is that day. It is important for corporates to build the supply today that they want to see in 2035. If not, there won’t be enough to hit their targets.
So you end up with two jobs running in parallel. Buy cheaper, highly rated credits for recognition now. Finance the removals book for the mid-2030s at the same time.
The diversification point
There’s a reason we set Residual up across nature-based removal, biogenic carbon removal and industrial abatement projects. It wasn’t hedging for its own sake. It was a view that demand in this market would keep moving across categories, and this standard is that view playing out. The avoidance window is real but it narrows as 2035 gets closer. The removals obligation is real but won’t increase drastically for some years. Ratings, prices, and methodologies will shift under every category between now and then.
A single-category bet in a market like this is just a timing bet you didn’t mean to make.
What I keep coming back to is that number on the dashboard. From 2027, 11,000 companies each with a public yes or no next to their name. Some will say no and write their paragraph of explanation and hope it reads well. Most, I think, will look for the cheapest credible way to say yes. SBTi was never going to trigger the revolution of carbon markets that some were hoping for. But, – in the round – I am cautiously optimistic that this will be an accelerator rather than a blocker to the voluntary carbon market.
Read more: SBTi Launches Corporate Net-Zero Standard 2.0, Sets Target For Carbon Removals
