Using Carbon Credits to Meet Corporate Climate Targets

Using Carbon Credits to Meet Corporate Climate Targets

This major new report by MSCI Carbon Markets analyses the impact of allowing firms to use carbon credits to help meet their science-based emissions targets. The study provides detailed modelling of how many carbon credits would be needed to close the gap to meet corporate emissions targets today and in 2030, how many new firms might sign up to science-based targets and their emissions footprints if allowed to use carbon credits, and the effect of allowing firms to use carbon credits to make new VCMI claims. The key findings are:

1. Across all firms with climate targets the gap between current emissions and targets is c.400 MtCO2e for Scope 1 & 2.  This increases to around 2 GtCO2e in 2030.  The gap in Scope 3 emissions targets is even larger, at around 1.4 GtCO2e today and over 7 GtCO2e by 2030.

2. If only firms that are on-track to achieve Science Based Targets initiative (SBTi) Scope 1 & 2 emissions targets can use carbon credits to bridge the Scope 3 gap, this could create a demand for carbon credits of 640 Mt today and 2.2 GtCO2e in 2030. This would require an additional expenditure of $19bn today and $65bn in 2030, assuming a $30/t carbon price.  If carbon credit use is limited to 50% of Scope 3 emissions today and 25% in 2030, the finance required would be $19bn and $3bn respectively.   

3. Carbon credits are considerably lower cost than internal abatement options. Allowing firms to use carbon credits to meet 50% of their emissions shortfall could incentivise another 1,000 firms to set or commit to science-based targets – an increase of nearly 20% on the number of firm’s committing today.  These new firms could have a market cap of up to $ 10 trillion.

4. If the lower threshold for using carbon credits in the VCMI “silver” claim tier was set at 10% (rather than 20%), this could encourage more firms to adopt this claim tier and participate in the carbon market. If all firms on track for Scope 1, 2 and 3 targets used carbon credits up to 10% of their footprint this would require some $10bn in finance and could mitigate some 320Mt of emissions.

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25601700Trove Research
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