According to SBTi data[1], 3 708 companies have made net-zero commitments within the SBTi framework. Additionally, there is a growing pool of corporations with net-zero or similar targets that rely on alternative standards, such as ISO, or even their own methodologies.

Still, few of these companies are buying permanent removals making it impossible for a removals industry to develop. Consequently, there has for quite some time been a persistent, nagging sense that a crucial piece of the puzzle is missing: How can companies achieve net-zero if permanent carbon removals are not available at volume?

The answer is simple: they can’t. This realization has already motivated a group of climate-leading companies to support the development of the permanent removals industry. However, for the industry to scale to necessary levels, much broader private sector engagement is essential.

Fortunately, the tide is turning. Both SBTi and ISO are expected to propose new requirements for consultation shortly, mandating that companies with net-zero targets gradually acquire permanent removals to address their residual emissions. This shift is a game-changer—for the climate, for companies with net-zero goals, and for suppliers of permanent removals. It will bolster the credibility of net-zero plans by ensuring they are backed by a systematic build-out of the industry these commitments rely on.

Critical Questions Arise

As this transformation unfolds, several key questions come to light. Let me address two that I find particularly critical and thought-provoking:

• Will mandating permanent removals deter emission reductions?

Counterintuitively, the answer is no—it will actually accelerate emission reductions. With this requirement, net-zero companies effectively introduce an internal carbon fee. The cost of acquiring permanent removals assigns a clear monetary value to each additional tonne of emissions reduced. In other words, every extra tonne of avoided emissions translates into savings for the business, as the expense of permanent removals is avoided. This creates a clear financial incentive for companies to intensify their emission reduction efforts.

• How should a company‘s permanent removal purchases affect its customers’ Scope 3 emissions?

This question is pivotal. Will the system be built only with a stick, or will it also be built with a carrot? Will the system get entangled in even more double counting of emissions, or should the system be set up for real net-zero?

Let’s unpack this. If a residual emission is already counterbalanced upstream in the value chain, it would be illogical—and even physically inaccurate—not to allow downstream companies to benefit from that action. Specifically, if a downstream company’s Scope 3 upstream emissions are not adjusted to reflect upstream removals, the system would end up counterbalancing the same emissions multiple times.

This principle is true at net-zero, where the number 100 in the example figure above is replaced with 10. But its equally true before net-zero and should also apply during the early stages, when initial requirements for acquiring permanent removals are likely to be limited to Scope 1 and Scope 2 emissions. The physical impact on a downstream company’s Scope 3 upstream emissions remains the same. If current GHGP rules for emissions reporting do not allow for this, they should be updated as part of this transformation.

Stick vs. Carrot

The resolution of this issue directly ties into the stick-versus-carrot question. With the right approach—where removals acquired to address residual Scope 1 and 2 emissions are recognized and carried through to downstream customers’ Scope 3 emissions (thus, applying the path of 90 in the figure above)—companies would have a powerful new incentive to acquire permanent removals.

In this scenario, the expense of acquiring removals would not only help the climate but also create benefits for customers. The system would shift from potentially being perceived as a burden to an opportunity and competitive advantage. Companies with net-zero targets acquiring permanent removals would now create tangible value for their customers, gaining a distinct advantage in the marketplace.

[1] https://sciencebasedtargets.org/companies-taking-action, 2025-02-10.