The GHG Protocol proposes stricter rules for accounting for "clean" electricity
The Greenhouse Gas Protocol (GHG Protocol) has proposed changing the rules for accounting for emissions from purchased electricity, known as Scope 2 emissions. Under the proposal, companies will be able to count clean electricity toward offsetting emissions from fossil fuels only if it was generated during the same hour and within the same power grid.
Currently, the GHG Protocol methodology allows renewable energy to be purchased within a single year and from a significantly broader geographic area. Fortune columnist Mike Fybus writes that the proposed update could significantly impact corporate plans to achieve net-zero emissions and the market for renewable energy certificates.
According to Fortune, nearly half of the companies on the Global Fortune 500 list have net-zero targets calculated using the current GHG Protocol methodology. Among North American companies on this list, nearly four out of five fall into this category. According to Phibbs, without transitional provisions for existing long-term contracts, the new requirements could devalue more than 90% of the multibillion-dollar certification market and trigger a costly, multi-year overhaul of approaches for many companies.
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The proposal has already sparked opposition. In late July, the GHG Protocol released a summary of more than 1,000 comments on the proposal. Hourly tracking was supported by 22% of all respondents, and among the 429 companies that answered this question, 12% supported it.
The Clean Energy Buyers Association—which includes Amazon, Salesforce, Dollar Tree, Lululemon, and The Nature Conservancy—stated that mandatory time- and location-based reporting could deter corporate investors and weaken the relevance and impact of the GHG Protocol. Supporters of the update believe that more accurate accounting will reduce opportunities for “greenwashing” through the purchase of cheap credits on the spot market. Critics, however, warn that the changes could weaken incentives for investment in renewable energy.
The GHG Protocol’s working group on updating the methodology for accounting for electricity-related emissions is scheduled to meet next month. In 2015, the organization introduced a voluntary system for using renewable energy certificates to account for Scope 2 emissions. According to a Fortune reporter, this approach has helped finance renewable energy projects with a total capacity of over 260 GW worldwide.
