[Editor's note: This article has been updated to clarify the distinction between companies' electricity consumption and their greenhouse gas emissions.]
Without a standardized way to measure the impact of their renewable energy purchases against greenhouse gas (GHG) emissions reduction goals, many companies find themselves in a pickle.
Energy purchasing instruments such as renewable energy certificates (RECs) and power purchase contracts vary by country, with ambiguous or conflicting interpretations as to whether they can be used as a basis for GHG emissions. As a result, companies are left without a clear link between their energy purchasing strategies and goals to reduce GHG emissions.
By documenting and publicly reporting on their GHG emissions based on instruments with unclear accounting procedures, companies expose themselves to reputational risk.
Now, those who seek to reduce their emissions may be able to reconcile the disparity between the two.
Building off its Corporate Standard, the GHG Protocol will be issuing international guidelines on whether power purchase instruments such as renewable energy certificates, contracts and electricity supplier programs should be used to quantify electricity consumption (also known as scope 2 emissions) in a GHG inventory.
The clarity gained with the guidelines will be a necessary move to ensure consistent emissions reporting and effective management of those emissions.
Calculating scope 2 emissions: Two approaches
With this development, questions abound about the right way to measure and report emissions in a GHG inventory. Should any of these renewable energy purchases be used to quantify scope 2 emissions? Do these purchases actually convey the right to claim the use of zero emissions electricity? And should they meet certain criteria in order to convey that claim?
Calculating scope 2 emissions on a consumption basis is fairly straightforward. This procedure uses an emissions factor that averages GHG emissions from power plants in a given grid region which approximates the emissions associated with the electricity physically consumed by company facilities.
By contrast, calculating scope 2 based on the company’s possession of various contractual instruments—like RECs or a supplier’s tariff—yields a different picture: It shows the electricity emissions associated with what a company has purchased, not necessarily what it’s physically consumed.
There are good arguments in support of both approaches, but the contractual approach raises a host of questions: Which types of instruments can be used for this calculation purpose? Does it matter whether the MWhs associated with the certificates have been used for a supplier’s mandatory requirements? Does the age of the renewable energy power plant matter? Should only newer plants be eligible? And is a contractual scope 2 profile fundamentally a “better” picture of a company’s performance—one that’s more accurate, relevant, complete, consistent and transparent—as compared with a consumption profile?
Photo of golden windmills in green envelope provided by 3Dstock via Shutterstock.
Next page: What should be included in the scope 2 guidelines
Mary, what are your thoughts
Mary, what are your thoughts on the ISO accounting rules http://en.wikipedia.org/wiki/ISO_14064
I know two multinational companies that use ISO Environmental Management practices.
Where do these rules differ from the accounting protocol WRI proposes?
thanks,
Kat
At Center for Resource
At Center for Resource Solutions (CRS) and Green-e we’ve been working closely with Ms. Sotos and WRI on the complex issues surrounding renewable energy purchasing in the U.S. and internationally. We’re fortunate in the U.S. to have a broad consensus on the greenhouse gas benefits of RECs: that they confer exclusive ownership of the greenhouse gas emissions attributes of renewable energy to the owner for use in Scope 2 claims, that double counting issues are statistically insignificant given the sophisticated tracking systems in use, and that use of RECs constitutes a zero-emission claim no matter what is “consumed” through the local grid.
Organizations, including WRI, the U.S. EPA, the U.S. Department of Energy, many state-level agencies, the U.S. Green Building Council’s LEED Program, CRS, and others, have published guidance on the use of RECs to reduce the greenhouse gas emissions associated with electricity usage. Consumption-based approaches, as mentioned in Ms. Sotos’s piece, are typically the least accurate method to estimate the GHG emissions associated with electricity use, and do not reflect the realities in most industrialized countries (and some developing countries as well) where power markets are structured to allow energy users to choose cleaner power options through contracts, tariffs and/or purchases of RECs or REC-like instruments.
There is also agreement on the difference between RECs and carbon offsets and how they can be used appropriately (which we explain in our recent paper, Renewable Energy Certificates, Carbon Offsets, and Carbon Claims).
In some international contexts, though, the issues we have long-since resolved in the U.S. are more complex given the lack of established REC markets and government guidelines that define GHG value and ownership. This makes the work WRI has been doing for over a year now with CRS and other participants in the Technical Working Group to clarify this crucial driver for new renewable energy development more important than ever.
Thanks Mary, I imagine those
Thanks Mary, I imagine those international guidelines from the GHG are eagerly expected.