Carbon Credits Serve as Supplementary Tool on Net-Zero Pathways

The Science Based Targets initiative's Net-Zero Standard, released in October 2021, clarifies how companies can use carbon credits as a complement to — not a substitute for — deep emissions reductions. Under the framework, companies must cut value chain emissions by at least 90% before using removal credits to neutralise residual output.

The SBTi Net-Zero Standard requires companies to set near-term targets of five to ten years aligned with a 1.5°C pathway, then long-term targets to achieve at least 90% reductions by 2050. Carbon credits — including removal credits tied to afforestation, soil carbon and direct air capture — may be purchased to go beyond value chain targets or to neutralise residual emissions. They cannot, however, be counted toward the core science-based targets themselves, a distinction the standard makes explicit.

For companies with global operations, distinguishing between Scope 1, 2 and 3 emissions is foundational to setting credible net-zero strategies. Scope 3 reductions remain the most challenging, requiring engagement across upstream and downstream supply chains. More than 1,030 companies have adopted science-based targets to date, creating a shared benchmark. Carbon removal credits — both nature-based and technology-based — serve a role in financing projects that would not otherwise occur, providing additionality that offsets alone cannot guarantee.

As companies progress toward long-term decarbonisation, the role of carbon removals is expected to grow, particularly for the residual 5% to 10% of emissions that cannot be eliminated through operational changes. The IPCC projected in 2021 that global temperatures will reach 1.5°C above pre-industrial levels by the early 2030s unless emissions are cut sharply. Climate Action Tracker data presented at COP26 suggested warming could reach 2.4°C by 2100 under current pledges, underscoring the urgency for both deep reductions and credible removal strategies.

Key figure — 90% emissions reduction target by 2050