That’s according to the Committee on Climate Change (CCC), which was asked by the Welsh Government to provide independent advice on how best to account and budget for the use of carbon.
Wales plans to reduce Carbon Dioxide emissions by 80% from 1990 levels before 2050.
Before the end of 2018, its Ministers must set interim emissions targets for 2020, 2030 and 2040, together with five-year carbon budgets for the periods 2016-2020 and 2021-2025.
The CCC advises that climate policies be designed carefully to avoid the risk of displacing industrial activity to other countries with less stringent climate policies. This is known as carbon leakage.
It adds the level of carbon budgets may need reviewing if industrial activity turns out to be significantly higher or lower than originally predicted.
The CCC accepts in certain cases credible and trustworthy emissions credits could be reasonably used, for example to offset increased emissions due to increased volumes of business won by competitive firms.
However, it states these credits should only ever be used as back-ups rather than being planned for. The group says they should be linked to international agreements or allowances that are part of meeting EU emissions targets.
Finally, it recommends Wales’ share of international aviation and international shipping be included within Welsh emissions targets.
The Welsh Government has confirmed it will be investing £6.5 million in circular economy projects.