In June 2022, Norton Rose Fulbright and BloombergNEF (BNEF) invited organizations to complete a brief survey on their decarbonization strategy. In the full report, we present the results of our survey and the key themes shaping how organizations engage with carbon markets on their pathways to net-zero. This article was also published on Norton Rose Fulbright’s website.
Organizations that have made long-term net-zero commitments are now expected to develop and deliver on credible and detailed implementation plans.
There are growing expectations that organizations also commit to ambitious near-term targets, and deliver rapid reductions within their own operations this decade.
Many organizations are seeking to drive emissions reductions in their broader supply chain (i.e. Scope 3 emissions). Market leaders are purchasing carbon credits to offset greenhouse gas (GHG) emissions that have not yet been eliminated on their pathway to net-zero.
Our key takeaways from the results of our survey are:
• Organizations are prioritizing reducing Scope 1 and 2 emissions, with a strong focus on the procurement of renewable energy.
• It will be a number of years before the international transfer of mitigation outcomes under Article 6 of the Paris Agreement takes off at scale and is accessible to the private sector. Voluntary carbon standards remain the preferred route to market for purchasing carbon credits for many organizations.
• Purchasers of carbon credits can be hesitant to enter into long-term offtake agreements due to risks relating to changes of law and policy. There is nevertheless strong interest in direct investments in carbon projects.
• Our respondents showed lower-than-expected interest in nature-based credits, but a relatively high proportion indicated that co-benefits will influence their choice of carbon credits.
• Purchasers have a preference to purchase directly from carbon project developers, with buying from brokers a second choice.
• A two-tiered market may emerge over the next few years, with voluntary carbon credits that have been authorized for international transfer and subject to a corresponding adjustment under Article 6 of the Paris Agreement considered to be higher quality than carbon credits that have not.
In the lead-up to COP26 in Glasgow in 2021, we saw record numbers of organizations join the United Nations Race to Zero Campaign, which now represents 8,307 companies, 595 financial institutions, 1,125 educational institutions and 65 healthcare institutions that have committed to net-zero by 2050.
Fast forward one year, and the focus has turned to implementation. Many organizations are well on their way to finalizing a net-zero implementation plan.
More than 3,900 companies – covering over one-third of the global economy’s market capitalization – are now working with the Science Based Targets Initiative (SBTi) to reduce emissions in line with climate science and the Paris Agreement goals.
While organizations are prioritizing reducing GHG emissions from their own operations and supply chain, carbon removals have an important role in neutralizing residual emissions that cannot be abated.
Market-leading organizations are now implementing climate positive strategies. These organizations are not only reducing emissions in accordance with science-based targets, but are neutralizing their emissions profile while on the journey to net-zero. The Voluntary Carbon Market Integrity Initiative has embedded this approach in its proposed Claims Code of Practice.
In the full report, we set out our key findings relating to net-zero commitments, carbon credit purchasing strategies and preferences for different types of carbon credits.