With Targeted Updates, the Greenhouse Gas Protocol Can Accelerate Customer-driven Clean Energy and Unleash Next Generation Procurement
The Clean Energy Buyers Institute’s NextGen Activator workshop series is identifying the market system updates necessary to broaden the suite of carbon-free electricity procurement options so customers can optimize the decarbonization impact of their procurement decisions.
The Greenhouse Gas (GHG) Protocol serves as the de facto global GHG accounting standard that helps companies and other energy customers buying clean energy measure and manage their GHG emissions. The GHG Protocol—namely, its Corporate Standard—is central to corporate reporting because it specifies the available actions for companies to reduce their emissions and establishes consistent global practices for how companies can document these actions in GHG reporting.
The GHG Protocol provides one of the four pillars of market infrastructure that underpin the voluntary carbon-free electricity (CFE) market system—along with 1) energy attribute certificates (EACs), 2) data for EACs and grid-supplied CFE, and 3) customer leadership programs. This market system drives investment in one billion EACs and billions of dollars of clean energy investments annually by companies seeking to achieve their CFE procurement goals. Table 1 below summarizes the role and relationship of market system stakeholders that oversee these four pillars:
Table 1: The Four Infrastructural Pillars of the Voluntary Carbon-Free Electricity (CFE) Market System
|CFE Market System Infrastructure Pillar||Main Role in the CFE Market System|
|Customer leadership programs, including RE100, Science-Based Targets Initiative (SBTi), Green Power Partnership, UN 24/7 CFE Compact, and others||Incentivize energy customers to set goals aligned with the program’s criteria Create communities of customers with these shared goals to promote shared learning and community growthRecognize customer success and leadership in a consistent, measurable, comparable, and marketable way|
|Energy attribute certificates (EACs), including renewable energy certificates (RECs) in the US, guarantees of origin (GOs) in Europe, and international renewable energy certificates (I-RECs) in African, Asian, and Latin American markets||Create a standard tradeable instrument that customers can buy that reflects ownership over the CFE attributes of a given megawatt-hour (MWh) of CFE generationProvide an additional revenue stream for companies’ CFE generation resource owners and investorsEnable customers to substantiate their CFE procurement claims|
|Data for EACs and grid-supplied CFE, including static data about a CFE resource location, type, capacity, etc. and dynamic electricity generation data||Ensure EACs capture verified fact-based, ex-post information for customers so they can substantiate their CFE procurement claimsEnable customers to assess their GHG emissions profile|
|GHG Protocol, namely the Corporate Standard||Enable customers to assess their GHG footprint organization-wideReport on the relationship between CFE procurement and emission reductions associated with electricity use|
The Clean Energy Buyers Institute (CEBI) has been engaging with its diverse NextGen Activator community—including energy customers, solution providers, and market system stakeholders—to clarify how best to update the GHG Protocol in a way that both enables more companies to procure CFE and more companies to send new market signals through their procurement decisions to drive systemic grid decarbonization. In the latest NextGen Activator workshop, over 50 NextGen Activator participants assessed an initial set of proposed GHG Protocol updates and opportunities for near versus longer-term improvements.
This workshop provided insights addressing two central questions:
Question 1: What types of GHG Protocol updates would help clarify how to account for next generation CFE procurement?
Insight #1: The GHG Protocol should make targeted, incremental updates to help expand the menu of CFE procurement options for customers and activate next generation procurement.
To help customers achieve their next generation procurement objectives, the GHG Protocol should make targeted updates to clarify existing guidance or provide new guidance on how they should account for their procurement of next generation solutions. For example, customers, the consultants and GHG accountants they hire to prepare annual GHG inventories need the GHG Protocol to recognize:
- Granular Certificates (GCs), which are EACs timestamped at an hourly or sub-hourly level (compared to the current monthly level timestamping standard) that follow EnergyTag’s GC Scheme Standard
- All CFE and complementary technologies with technology-neutral language and definitions (rather than only renewable energy resources)
- The use of EACs to cover the electricity use associated with customer value chains (i.e., a market-based method for Scope 3 electricity emissions)
As a general principle, any CFE market system update, including those to GHG Protocol, should ensure that customers retain the ability to substantiate their CFE procurement with verifiable claims through robust energy EAC issuance and tracking systems that ensure no double-counting and establish the credibility of procurement claims. Table 2 below summarizes the current shortlist of updates to the GHG Protocol that would enable customers to understand how they can account for next generation procurement.
Table 2: GHG Protocol Updates Required to Enable Next Generation Procurement
|Top Customer-Identified Next Generation Procurement Objectives||GHG Protocol Updates Required|
|1. Procure any complementary or CFE resource||• Recognition of EACs inclusively from all CFE technologies |
• New guidance for accounting for energy storage (including from a variety of original resources), including recognition of GCs (i.e., hourly or sub-hourly timestamped EACs)
|2. Match energy consumption with CFE procurement on a 24/7 basis||Recognition and clearer guidance for the use of GCs as well as granular load data and emission factors|
|3. Procure CFE at the most carbon-intensive times of day||Recognition and clearer guidance for the use of GCs as well as granular load data and emission factors|
|4. Procure CFE in the most carbon-intensive locations||Updated guidance around market boundaries|
|5. Procure CFE to cover electricity use across value chains||Develop market-based methods to allow use of EACs to apply to electricity-related emissions in Scope 3|
|6. Apply over-procurement of CFE from certain regions to places without procurement options||Updated guidance around market boundaries|
|7. Motivate systemic grid decarbonization beyond the organization’s operations||Methodology to accurately account for combination of purchases and grid-supplied CFE|
|8. Deliver social and community benefits that promote further decarbonization of the grid||N/A|
Question #2: Which GHG Protocol updates can be addressed in the near-term and which require more extensive investigation before the needed updates become clear?
Insight #2: The GHG Protocol can help activate a subset of next generation procurement options in the near-term by adding technology inclusive language and clarifying the role of Granular Certificates (GCs) in the GHG Protocol’s Emission Factors (EF) hierarchy. Longer-term, larger and complicated questions about how to treat concepts like avoided emissions will be important but there isn’t sufficient near-term consensus.
The various GHG Protocol updates that CEBI identified with its NextGen Activator community that would help activate next generation procurement vary in the complexity and additional investigation necessary to define related new guidance. As a result, the GHG Protocol can address some updates more quickly than others.
It is important to incorporate these near-term updates into the GHG Protocol because, as it stands today, the absence of clear language and/or acknowledgement of these next generation components results in inconsistencies and/or reluctance to capture next generation procurement by customers and their third-party consultants and GHG accountants.
There are two specific updates the GHG Protocol can likely make swiftly:
- Technology-neutral guidance that provides clear acceptance of EACs from any CFE generation and complementary resource
- Recognition of GCs in line with EnergyTag’s GC Scheme Standard and clearer guidance for the use of GCs as well as granular load data and emission factors
These two updates are likely the easiest to implement because there is nothing that precludes companies from, respectively, procuring EACs from any CFE resource (pending their issuance from EAC issuing bodies) or accounting for CFE procurement on an hourly basis (pending the integration of GCs with EAC issuing bodies to avoid double-counting/double-claiming). However, the fact that the GHG Protocol does not provide technology-neutral language or specify the position of GCs in the EF hierarchy, leads to confusion, accounting inconsistencies, and undermines the availability and use of various next generation procurement solutions.
Similarly, a third update that the GHG Protocol could likely also make swiftly is accepting and clarifying GHG accounting guidance on the use of EACs to cover the electricity-based emissions from upstream and downstream value chain partners. Table 3 below summarizes a set of eight updates to the GHG Protocol based on their relative complexity and resulting expected adoption timeframe that would help activate next generation procurement.
Table 3: List of GHG Protocol Updates Required and Overall Timeframe and Complexity
|Timeframe and Complexity||GHG Protocol Updates|
|Nearest-term GHG Protocol update opportunities due to lowest complexity and investigation required||• Technology inclusive guidance that provides clear acceptance of EACs from any CFE generation and complementary resource|
• Recognition of GCs (i.e., timestamped EACs) and clearer guidance for the use and potential hierarchical treatment of GCs and more granular load data and emission factors
|Medium-term GHG Protocol update opportunities due to medium complexity and investigation required||• Acceptance and clarified accounting guidance on the use of EACs to cover the electricity-based emissions from upstream and downstream value chain partners|
• Redefined guidance on accounting for energy storage, including for storage co-located with CFE resources versus storage storing electricity from the grid
• Updated guidance around market boundaries and whether to allow for CFE over-procurement in dirtier grids or in certain regions to cover limited supply options in other regions
• Improved guidance to the Grid-Connected Electricity Projects substandard of the Project-Accounting Protocol, which would be one possible start at a standardized method for calculating avoided emissions
• Clear methodology to accurately account for combination of purchases and grid-supplied CFE
|Longest-term GHG Protocol update opportunities due to higher complexity and investigation required||• Clarity and specificity around the use of avoided emissions in GHG accounting, mainly due to the challenge of verifying and attributing avoided emissions|
In the months ahead, CEBI will convene additional workshops in the NextGen Activator series to define solutions, implications, and implementation pathways for these identified GHG Protocol updates that will help activate next generation procurement and drive more targeted investments for systemic grid decarbonization. The next workshop in this NextGen Activator series will pivot the focus of discussion to another focus area of CEBI’s NextGen Initiative: accelerating data access to enrich EACs with new attributes. During this workshop on September 7, 2022, CEBI and participants will dive into the current ecosystem of data types and the barriers related to accessing the needed new data to introduce enriched EACs and activate next generation CFE procurement.