The contribution of voluntary corporate commitments to reduce greenhouse gas emissions in the context of EU-mandated policy instruments

Companies in the European Union are subject to regulation through both the Emissions Trading System (ETS) and the Effort Sharing Regulation (ESR). In addition, they commit to voluntary climate targets. In this way, they not only support domestic mitigation, but also demonstrate social responsibility, address potential cost increases, and mitigate risks. Gaining a better understanding of the interaction between government-led climate policies and voluntary corporate commitments could provide valuable insights into the progress and ambitions of companies. This assessment helps determine whether their goals are in line with EU policies and the Paris Agreement.

To explore this, we assessed the 2030 emissions reduction targets of EU companies with approved targets by the Science Based Targets Initiative (SBTi) for the year 2020 and compared them with those outlined in ETS and ESR. Initially, the interaction between the two EU policies and voluntary targets was examined, and subsequently emissions pathways were developed with and without voluntary targets to evaluate potential ambition. Our findings indicate, that voluntary targets could contribute between 4-14% relative to the 2020 EU policies scenario. However, the outcome heavily relies on the realisation of ETS reductions, which currently function as a “waterbed”, absorbing additional emissions reductions from companies that can be traded to others. To implement this effectively, a separate fund safeguarding future emissions would need to be established. Furthermore, the results suggest that, in total, these corporate reductions are at most in line with or marginally more ambitious than a 2 °C pathway by 2030.