New SBTi Net Zero Standard 2.0 draft: Good for BVCM – Bad for CDR

The Science Based Targets initiative (SBTi) just released its second consultation draft of the Corporate Net-Zero Standard 2.0. Much has changed since the first draft, especially regarding carbon removal and Beyond Value Chain Mitigation (BVCM). These two concepts are now merged into a new framework called “responsibility for ongoing emissions”. This new draft marks a real step forward for corporate climate responsibility, but simultaneously, a step backward for durable carbon removal compared to the last draft.

A strong move on ongoing emissions responsibility

The new draft introduces a structured way for companies to take financial responsibility for their ongoing emissions before they reach net zero. Now all companies must disclose whether they finance climate, and those who don’t must explain why. This is the most positive change in the draft in my view. The transparency could itself drive a wave of new climate finance.

Companies can earn SBTi recognition for taking responsibility for at least 1% of their ongoing Scope 1–3 emissions. They can do this either by:

• Delivering ex-post mitigation (such as verified carbon credits), or

• Applying an internal carbon price to 1% of their ongoing emissions and using the funds to support climate action (min $20/t recommendation) .

SBTi also introduces a Leadership tier, recognizing companies that take responsibility for 100% of their ongoing emissions. To qualify, they must:

• Apply a credible carbon fee across all scopes, (they recommend minimum $80/t), and

• Ensure at least 40% of that spend delivers quantifiable mitigation outcomes (rather than only funding).

At Milkywire, we already support this approach through our Climate Transformation Fund (CTF). It has been built as a BVCM fund from the start in 2021. We channel corporate contributions into innovation, mitigation-enabling outcomes (like advocacy and policy work), and forward-looking mitigation projects, precisely the type of activities that are listed as eligible outcomes by the SBTi.  We can help companies design internal carbon fees, allocate funding responsibly, and align with the new SBTi recognition criteria.

But a setback for carbon removal

For carbon removal, the draft is a disappointment. There’s no requirement to start supporting durable CDR today, not even a soft signal. Even companies earning recognition for ongoing emissions responsibility aren’t mandated to include any CDR in their portfolios.

Only after 2035 does SBTi plan to make ongoing emissions responsibility mandatory, and even then, durable removals will only be a fraction of what’s required. That’s far too late, without near-term demand, today’s carbon removal ecosystem will not evolve into the size needed to meet the needs. 

The new text on neutralization at net zero also appear concerning at a first read. SBTi has removed the requirement to fully neutralize residual emissions with permanent carbon removals, replacing it with a vague 41% threshold for “long-lived” removals with the rest allowing short-lived removals. This likely comes from the SBTis projections of what emissions remain at net zero, they have consistently stated they believe fossil emissions is only a minority of residual emissions which is the part that needs to be counterbalanced with permanent removal. The most logical thing would be to include the like-for-like principle, not a fixed percentage and there is a question on that in the consultation. However I know that the SBTi is fully committed to the principle of only allowing permanent removals for fossil emissions and expect them to clarify that in coming drafts.

A positive clarification is that the responsibility for Scope 3 emissions can be shared, if companies can account for what their value chain partners have already taken responsibility for their emissions there is no need for double compensation. The same goes for the responsibility for ongoing emissions. 

In any case, companies serious about climate integrity shouldn’t wait for others to move first. The choices made now will decide whether durable carbon removal is ready when the world finally needs it.

Robert Höglund is a member of the SBTi Expert Advisory Group on Ongoing Emissions and BVCM for the Corporate Net-Zero Standard 2.0.