Frequently Asked Questions

Science-based targets aim to align a company’s emissions reduction goals with the latest climate science and necessary reductions to achieve global climate targets.

By setting a science-based target aligned with SBTi Initiative’s criteria and recommendations and reporting progress transparently against it, a company can demonstrate that it is taking meaningful action to reduce emissions and support the global transition to a low emissions future.

Carbon neutrality is achieved when an activity, process, organization, event, or building has zero net emissions, typically by estimating their emissions, creating a reduction plan, and purchasing offsets equivalent to their emissions. Their GHG emissions should be verified and certified by an independent third party to ensure the claims are robust.

On the other hand, the UN defines net-zero as reducing greenhouse gas emissions as close to zero as possible and absorbing any remaining emissions through oceans and forests. The science-based targets initiative (SBTi) has defined a standard for businesses to reach net-zero which requires businesses to set a science based target that aligns with a 1.5 degree world and only offset 5-10% of their emissions once this target is met. Therefore, businesses must first reduce their emissions by 90-95% to claim net-zero status. The Net-Zero Standard.

Climate neutrality, by the UN definition, means achieving zero net greenhouse gas emissions by balancing emissions with natural absorption. This is similar to the more commonly used term net-zero. However, some businesses have created their own definition of climate neutrality, diminishing its credibility.

The Aotearoa New Zealand Emissions Trading Scheme (NZETS) is compliance market where “mandatory participants” are required to surrender New Zealand Units (NZUs) to the government for their emissions. NZUs can be generated from participants who voluntarily register and receive NZUs for activities that remove carbon from the atmosphere, such as carbon sequestration by trees.

Voluntarily opting into the NZETS is not the same as participating in the voluntary carbon market (VCM).

The VCM, as the name suggests, is a self regulated global marketplace where businesses and individuals trade carbon credits without legal obligation. Companies use it to achieve additional climate goals, like offsetting emissions or making claims such as being “carbon neutral” or “net zero”. Unlike the compliance-driven NZETS, the VCM provides an avenue for voluntary action beyond what’s legally required.

Therefore, credits generated under the NZETS should not be used for voluntary offsetting claims.

In the voluntary carbon market, the concept of additionality is crucial to ensure the carbon credits generated can be retired to voluntarily offset GHG emissions. A project is considered “additional” if it goes beyond the “business as usual” scenario. This is typically determined by assessing whether the emission reductions or removals would occur without the financial incentive of carbon credits gained from the project. Additionality is one of the core principles defined by the Integrity Council for the Voluntary Carbon Market (ICVCM).

By ensuring additionality, we can be sure that a project is reducing or removing GHG emissions from the atmosphere that would not happen otherwise. This is important for companies and individuals who want to make a meaningful impact on climate change through carbon projects and offsetting.

Risks for entities purchasing offsets to make claims include:

• Offsets retired to make claims do not represent additional reduction or removal of equivalent carbon dioxide from the atmosphere i.e. they are not achieving the reductions or removals required to make the claim valid. The Integrity Council for Voluntary Carbon Markets (ICVCM) has developed the Core Carbon Principles and an Assessment Framework which carbon crediting entities can align with to demonstrate they are producing high integrity real offsets with their project.

• Using offsets to improve the perception of an entities emissions may be considered “greenwashing” especially if the company using these offsets does not also work towards reducing their emissions. The EU is banning carbon neutral claims due to their misleading nature by 2026. EU bans ‘misleading’ environmental claims that rely on offsetting.

Double-counting occurs when greenhouse gas emission reductions or removals are counted more than once to meet mitigation targets or goals, and this risk typically arises when carbon credits are traded on international markets. To avoid this, it is important to ensure that credits used to mitigation claims are transparently reported and retired to align with international best practice.

Ensuring that GHG emission reductions or removals are only counted once is crucial in meeting global climate targets and maintaining high integrity mitigation claims.

An Article under the Paris Agreement, Article 6, allows a pathway for countries to collaborate on emissions reductions and removals to meet their Nationally Determined Contribution (NDC) by trading carbon credits or “mitigation outcomes”.

It aims to allow countries to invest in emissions reductions and removals activities outside their country to support an equitable transition to a low emissions future and accelerate global emissions reductions and removals.

The rules and modalities for how this Article will be implemented are still being developed, but avoiding double counting of mitigation outcomes, towards multiple NDCs, is one of the key issues this framework must prevent.