The Voluntary Carbon Market Integrity initiative’s latest guidance on the use of carbon credits by companies undermines VCMI’s stated mission of combating greenwashing and setting out a framework for making valid climate claims.
Last year, VCMI published its long anticipated Claims Code of Practice, which provides guidance for companies on how to use carbon credits with integrity. This guidance was largely welcomed, including by CMW, and has been adopted by some companies. Since then, VCMI has expended a lot of effort on developing an alternative for less ambitious companies which are failing to slash their indirect emissions: the Scope 3 Framework (formerly called the Scope 3 Flexibility Framework).
This revised Scope 3 Framework is not strict enough and could be an open door for climate laggards to make spurious climate-related claims today while doing very little to curb their present and future climate impact. Perversely, the framework would do little to prevent companies with rising emissions from greenwashing their inaction and concealing their worsening record.
Too many credits for too long
The main weakness of the framework is that it allows companies to use a large volume of credits for a very long time, before requiring them to get back on their science-aligned decarbonisation trajectory. Specifically, companies would be allowed to pollute more than their annual decarbonisation target (for scope 3) by 25%, and do so until 2038.
Allowing for a massive overshoot of 25% each year dwarfs the annual reduction rate of around 4% which is needed between 2020 and 2030 to meet the Paris Agreement’s goal of limiting global warming to 1.5°C (4% annually would deliver around 50% reduction over 10 years). If companies were to use this new level of flexibility instead of slashing their indirect emissions, it would drastically undermine our collective climate goals.
The 2038 phase-out date is based on VCMI calculations that focus on the time it will take for the sectors that are hardest to decarbonise to get back on track with pathways compatible with a “well below 2°C” trajectory. Based on this analysis, only extremely hard-to-abate sectors (aviation, shipping and trucking) will not yet be on a pathway that is compatible with the Science Based Targets initiative (SBTi) by 2038. Other sectors should reach it much sooner, such as aluminium (2031), chemicals (2033), steel (2033) and cement (2037).
As the VCMI framework is by nature voluntary, there is a real risk of adverse selection, whereby companies in sectors that are easier to decarbonise will, nonetheless, sign up to the new scope 3 rules which have been crafted for much harder-to-abate sectors, while those with even lower climate ambition would simply stay out.
Incentivising (in)action
The overall challenge that VCMI is facing is finding a way to incentivise action from firms genuinely trying to reduce their climate impact without creating a system that provides a green fig leaf for companies that do not deserve it.
A key problem with the idea of giving recognition to companies which are not doing enough in the short term, on the expectation that this will incentivise them to do more in the long term, is that companies have a clear incentive to make the claims today regardless of their future plans. Those interested in greenwashing rather than green action can always quietly drop out of the initiative in the future when they stand foul of the rules, as others have done before. It’s like offering a treat to a three-year old in exchange for a promise of good behaviour in six-months time.
Boundaries
There is a space for VCMI to exist. It should focus on guiding companies to adopt clear climate claims that not only incentivise action but also help consumers and investors make the right choices. The further away VCMI steps from this, the less useful it becomes as it increasingly enters a different area – that of corporate climate target setting and validation – where other institutions have a lead.
The VCMI Claims Code published last year is a strong framework to incentivise action. It would be a shame for VCMI to lose some of its credibility by promoting a different, much weaker version of its own work, at a time when the world desperately needs ambitious action.
To bring about action, we should focus less on convincing the laggards to join voluntary initiatives, and more on shining a light on trailblazers who are showing what is possible and guiding a path for the adoption of policies that will in turn bring entire sectors with them.
