Draft Corporate Net-Zero Standard V2 Explained: Environmental Attribute Certificates
18th Mar 2025
This blog outlines how the Science Based Targets initiative (SBTi) defines environmental attribute certificates (EACs), which includes carbon credits, and how the revised draft of the Corporate Net-Zero Standard proposes they are used.
Today, the SBTi has released the first draft of the updated Corporate Net-Zero Standard Version 2 (V2) for public consultation. Businesses have told us they need clearer guidance on how to use EACs, including carbon credits. In response, we’ve made this a focus of the update.
As part of our research, in 2023 we issued an open call for evidence to assess the effectiveness of EACs in corporate climate targets. We received over 400 responses from a diverse range of stakeholders. We published a synthesis of the evidence submitted in a report: Evidence Synthesis Report Part 1: Carbon Credits, in July. Today we are publishing Part 2: Energy Carriers and Commodities Certificates, alongside three detailed reports covering EACs for fuels, electricity, and commodities.
In this blog, we explain how the SBTi defines different types of EACs and how the draft V2 of the standard proposes they should be used.
What are environmental attribute certificates?
EACs are instruments that are used to convey environmental- or sustainability-related characteristics of a given activity or commodity. Within the context of the SBTi, they fall into two broad categories:
1. Carbon credits
These certify the mitigation outcomes of projects that reduce, avoid, or remove carbon emissions.
They come in three main types:
- Emissions avoidance credits: Issued from activities that prevent potential future emissions compared to projected scenarios without those activities. For example, a zero- or lower-carbon electricity project may generate carbon credits provided that a higher-emissions alternative would have been built and operated instead.
- Emissions reduction credits: Issued from activities that lower emissions compared to a base year, such as improving energy efficiency or switching to low-carbon fuels.
- Carbon removal credits: Issued for activities that remove and store carbon, such as reforestation (biological) or underground storage (geological).
2. Energy and commodity certificates
These convey the environmental performance of activities. The three main types include:
- Electricity certificates: Certify that electricity comes from renewable or other zero-carbon sources, allowing companies to substantiate claims of renewable energy use or scope 2 reductions.
- Fuel certificates: Establish the environmental or sustainability performance (e.g. greenhouse gas (GHG) emissions) of a particular fuel.
- Commodity certificates: Establish the environmental or sustainability performance (e.g. GHG emissions intensity) of a commodity or material like timber, agricultural products, and metals.
Permanent carbon removals and related carbon credits in the draft V2 standard
As with the current version (V1.2) of the standard, V2 does not propose allowing offsetting—which we define as companies purchasing carbon credits that do not originate from activities in their value chain to meet emission reduction targets.
Our research and consultation to date suggest that investment in permanent carbon removals and related carbon credits can complement companies’ efforts to reduce their carbon footprint—but should never be a substitute for this. The consultation invites the discussion of such opportunities, including:
- Beyond value chain mitigation: In the current V1.2 of the standard, we recommend companies invest in beyond value chain mitigation (BVCM), for example by buying high-quality carbon credits. The draft V2 standard proposes a stronger incentive for this leadership activity by formally recognizing companies that are taking responsibility for their ongoing emissions—those they continue to release while they decarbonize—to incentivize additional decarbonization and mobilize climate finance at scale. It is not proposed that this activity is counted towards the progress and achievement of abatement targets.
- Neutralization: The current V1.2 of the standard requires companies to neutralize any residual emissions upon meeting a long-term science-based target before 2050. Carbon removal credits are an option for neutralizing residual emissions—those which remain at the net-zero target year after all possible abatement measures have been implemented. Our draft V2 standard recognizes the need to further scale-up mitigation efforts well before 2050, including carbon removal capacity. We are therefore consulting on three options for addressing residual emissions between now and net-zero.
Energy and commodity certificates in the draft V2 standard
The draft Corporate Net-Zero Standard V2 includes potential uses for energy and commodity EACs as a company is decarbonizing to net-zero. These proposals are designed to make the standard more comprehensive and more practical – in line with feedback from businesses about what they need.
Direct mitigation—actions that are directly linked to specific activities in a company’s value chain and traced through a credible system—will always be the priority in the SBTi’s standards. As such, energy and commodity EACs which can be traced directly to a company’s value chain, and thus substantiate direct mitigation, are the preferred use of EACs in the draft standard.
However, acknowledging the practical challenges in tracing some emissions sources in the value chain, and in some cases of abating emissions at the source, V2 of the standard introduces the concept of indirect mitigation. This refers to the use of energy and commodity certificates when a company cannot directly trace emissions or when insurmountable barriers prevent them from mitigating emissions. This indirect mitigation is only permitted in very specific circumstances. The EACs used must be relevant to a company’s value chain and drive outcomes comparable to direct mitigation. Such measures are expected to adhere to high quality criteria that will be refined through the public consultation process and in consultation with the expert working groups that the SBTi is setting up to support the consultation process.
With that in mind, here’s how energy and commodity EACs relate to scopes 2 and 3 within V2 of the standard:
- Scope 2: Under the revised standard, companies must set both a location-based scope 2 target and a procurement-based target, which can either be a market-based scope 2 target or a zero-carbon electricity target. As with V1.2 of the standard, V2 allows companies to use energy EACs to substantiate this direct mitigation for scope 2 market-based targets. However, new criteria, such as spatial and, where possible, time matching, are introduced to enhance the effectiveness and impact of which EACs companies can use to address scope 2 emissions.
- The revised standard also acknowledges that some companies may lack access to zero-carbon electricity in certain grids. In such cases, the draft V2 standard allows the use of EACs to substantiate the sourcing of zero-carbon electricity from other grids as a time-limited alternative.
- Scope 3: V2 clarifies the use of energy and commodity EACs to address scope 3 emissions in indirect mitigation as a time-limited measure and only when emissions sources cannot be directly mitigated. That is, when a company cannot trace an emissions source to an activity or activity pool (a set of emissions sources, e.g., a supply shed, that may physically serve a company but where traceability to an individual source is not possible), or if insurmountable barriers persist in addressing a source of emissions. This criterion is designed to drive transformation relevant to a company’s value chain.
- For example, a company may address their emissions from business travel through Sustainable Aviation Fuel (SAF) certificates following a book-and-claim model.
Help refine proposals on the use of EACs in the SBTi Corporate Net-Zero Standard
We are consulting on all the above proposals as part of the public consultation of the draft Corporate Net-Zero Standard V2.
We are ready to iterate on this draft—to simplify or refine it to make the standard more effective. The feedback we gather from consultations, our expert working groups and pilot testing will all inform changes ahead of the draft’s final approval. We encourage everyone to review the draft standard, explore our digital consultation guide and submit feedback by June 1, 2025.
If you want to learn more, register for our Q&A webinar on 9 April and submit a question to be answered by our expert team.
