Are carbon credits and Science Based Targets misleading?

In 2020, Imperial’s Grantham Institute responded to a call for evidence from the Imperial College Socially Responsible Investment Policy Working Group. The letter said that ‘many of the fossil fuel companies we hold investments in (e.g. Exxon Mobil, BP, Shell) have also spent significant sums of money lobbying against meaningful climate action – in many cases by casting doubt on the scientific consensus for climate action.’ Two years later, Imperial researchers co-authored an article concluding that the net zero pathways of fossil fuel companies are incompatible with global warming goals in the Paris Agreement.

Despite this, Imperial continues to invest in and partner with fossil fuel companies. The College asks any fossil fuel companies it invests in to commit to the Science Based Targets (SBTs) Initiative, a United Nations-backed program which monitors and assesses the net zero targets of companies. Imperial believes signing up to SBTs ‘will enable fossil fuel companies to reach net zero by 2050 (or earlier) with realistic interim targets,’ according to its Socially Responsible Investment policy.

However, SBTs do not hold a company liable for all of its emissions. Their alignment to Paris Agreement targets only includes scopes 1 and 2 emissions, not scope 3. Scope 1 is a company’s direct emissions, and scope 2 is emissions from operating the company’s infrastructure, such as electricity. On the other hand, scope 3 emissions are most of a company’s indirect emissions, including employee and student flights. A 2021-22 evaluation found that 79% of Imperial’s emissions were scope 3, but this did not include any flights from overseas students, who make up 61% of undergraduates and postgraduates. We calculated that including flights from students and staff may increase scope 3 emissions to 85% of total emissions which are ignored by SBTs.

For fossil fuel companies, scope 3 emissions include the emissions created by burning the fossil fuels they extract – which don’t feature in the SBTs. According to GlobalData, Shell’s invisible scope 3 emissions made up 97.14% of their total 2021 GHG emissions. 

Moreover, fossil fuel companies are not meeting the SBTs by scaling down their oil and gas production. According to the think tank Common Wealth, Shell invested five times as much in oil and gas as it did in renewables and energy solutions in the third quarter of 2023. It also found that BP invested 11 times as much in oil and gas as it did in ‘low carbon technologies’. Restricting supply – such as stopping any new oil or gas licences – is important to mitigate the effects of climate change.

Last month, the Science Based Targets Initiative allowed the use of ‘carbon credits’ as evidence that a company is reducing its scope 3 emissions. The idea is that protecting a rainforest from deforestation would offset the carbon emissions that company creates. However, ‘protecting’ an area tomorrow does not justify using the carbon credits to burn fossil fuels today. “Carbon offsetting is problematic on so many different levels,” said Joe Eisen, executive director of Rainforest Foundation UK. “First and foremost, it enables business-as-usual in the Global North. And then there’s all sorts of problems around whether it actually does anything to stop climate change. For example, it’s so easy for companies to inflate the baseline of deforestation and say that all this deforestation would be far higher if we weren’t there. That means they can generate more carbon credits to sell, but it may not be linked to reality.”

Two weeks ago, Imperial researchers co-authored a paper in Science highlighting yet another problem with SBTs.

In response to the change in carbon credit guidelines, employees of and advisers to the Science Based Targets Initiative have called for the CEO to resign. According to Bloomberg UK, some advisors felt they were not sufficiently consulted before the change was made. 

Eisen told Felix that there are several other problems with carbon credits – including additionality, leakage, and permanence. Additionality means “people will never know what would happen if the project was there or not.” Referring to leakage, Eisen said, “Even if you stop deforestation in one place, that doesn’t mean a logger won’t just go to the next province and log there.” Finally, offset projects are not permanent. “In theory, you might save deforestation for a year or two,” Eisen explained, “but what happens if in a warming climate there’s forest fires and all the credits bought by a fossil fuel company go up in smoke? 

“There are so many problems at the conceptual level with offsets,” Eisen continued. “They’ve been trying to make them credible for about 15 years now, and they still haven’t been able to do it. The current price of carbon is less than US$1.00 a tonne on the voluntary markets, and that’s not a large enough incentive to induce behavioural change in forests.”

Two weeks ago, Imperial researchers co-authored a paper in Science highlighting yet another problem with SBTs. They assume that the market share of a company will remain the same in the future – the most polluting companies now will remain the most polluting in decades’ time, albeit with lower absolute emissions. This does not allow space for greener, more ethical emerging competitors to emit much carbon dioxide without overshooting a sector’s Paris Agreement targets. As what the paper calls ‘solution-providing’ companies expand, their carbon emissions will expand too. The Science-Based Targets Initiative does not account for this because it cannot imagine existing, polluting corporations losing their market share to new companies. These existing corporations form 48% of the Science-Based Targets Initiative’s income, as they pay to get their decarbonisation plans validated.

When asked what Imperial can do instead of relying on SBTs, Joe Eisen emphasised the importance of divesting from fossil fuels. “I know there’s a line of argument that you need to stay in the house to change the house, with the rise of activist investing and so on,” he said. “I think some of the recent cases have shown the limitations of this approach.” Eisen also suggested Imperial invests in “other projects which support sustainable development in tropical forest countries that empower and equip local communities to have what they need to protect and thrive in their forests.”