Does the definition of carbon credits involve allowances in the EU ETS?


After reading through the Net Zero for FIs document released yesterday I find it difficult to separate offsets (i.e. REDD+) and allowances (i.e. EU ETS) from SBTi’s definition of carbon credits. I can see that REDD+ is used as an example of carbon credits, and I would define REDD+ as a project offset. There are some major design differences in these, compared to compliance markets such as EU ETS.

How does SBTi separate allowances and offsets? Are they both covered by “carbon credits”? If so, would this also entail that FIs are unable to use cancellation of allowances in the EU ETS towards its near- or long term net zero goals?

Hi, thanks for your patience as we follow up on this one.
With both the corporate and financial net-zero standard, we have not yet finalised the quality criteria of what will be accepted as a valid carbon credit. These quality criteria will also address the differences between a project offset and a carbon credit.

For now, carbon credits, offsets or allowances cannot be used by companies or FIs to meet their mid-term SBTs. Rather SBTs, must be focused only on decarbonisation. The use of the carbon credits will be accepted for the long term net-zero targets, once further guidance is published. Our recent FAQ on this topic provides further background: