Introduction
The Greenhouse Gas Protocol Scope 2 Guidance is the most widely used and internationally accepted set of rules. Its requirements for energy tracking also form the basis for the tracking requirements of the EKOenergy ecolabel, as well as the CDP and the RE100 guidelines.
An increasing number of consumers feel the pressure to switch to renewable energy and to communicate about it. Therefore it is important that the rules about how they can and should prove the origin of their energy be as clear as possible, and that all proofs and reporting instruments fulfil the minimum quality criteria as listed by the Greenhouse Gas Protocol Scope 2 Guidance. Companies and individuals should be able to prove that they are buying and consuming renewable energy before making any public claim.
According to the Greenhouse Gas Protocol, “the contractual instruments used in the market-based method for scope 2 accounting shall:
- Convey the direct GHG emission rate attribute associated with the unit of electricity produced.
- Be the only instruments that carry the GHG emission rate attribute claim associated with that quantity of electricity generation.”
Markets around the world present differences in setup and practice, giving rise to many discussions on whether specific systems in specific countries fulfil the basic requirements of the Greenhouse Gas Protocol. Sometimes consumers even wonder if the market rules in a country simply make it impossible to fulfil the unique claim requirement of the Greenhouse Gas Protocol.
If it’s not possible to fulfil the quality criteria of the Scope 2 Guidance, there would basically be no way for the consumers to make use of the ‘market based method’, i.e. to buy renewable energy on the market in that specific country. Hereafter we list some of the difficult issues and explain EKOenergy’s standpoint in dealing with these challenges.
In a nutshell, EKOenergy’s approach relies on pragmatism and focuses on best available practices. We take the reality of diverse market situations into account and focus on the most impactful and available ways to obtain concrete results and positive change.
1. What if the state also makes claims on the same volumes used by consumers?
States report the share of renewable energy in the country in various ways and publish numbers as part of their obligations under international agreements and treaties. These numbers are based on the production of renewable energy within a country, and obviously include the volumes claimed and consumed by private entities as well. The solar panels on your roof, the renewable energy production sold as a green tariff, etc. are all included in the numbers reported by states.
Double counting has to be avoided among countries, in the same way as it is among consumers. The ‘no double claim’ criterion stated in the Greenhouse Gas Protocol means that the instrument transfers emissions rights between market players, however it does not prohibit the use of the same volumes in aggregated numbers and statistical information collected and published by regional, national and other authorities, and others.
From EKOenergy’s perspective as well, countries taking all production into account (including the volumes which consumers made claims on) does not constitute a case of double counting.
NOTE: Concerning the claiming of carbon emission reductions (carbon credits or offsetting market), rules are being developed in order to reach alignment with the Paris Agreement to ensure ‘corresponding adjustments’ if carbon emissions reductions are transferred and claimed. This is supposed to also work for situations for “participation in the mitigation of greenhouse gas emissions by public and private entities”, mentioned in chapter 6.4 of the Paris Agreement. In other words, a connection needs to be made between individual claims and numbers reported by states, in a way that only one entity can claim the reduction. How this will be implemented remains to be seen. And even when implemented it will cover, at best, only a specific part of the carbon markets (and not affect the renewable energy markets)
2. What if there are multiple tracking systems?
There may be more than one tracking system in a specific geographic area, sometimes one (or more) of these are operated by public authorities and others by private entities. This can be confusing especially for those who are used to the situation in the traditional renewable energy markets of the US and the EU, where ‘one system per territory’ has been a guiding principle.
In countries where renewable energy markets are recently developing, however, the market structure grows bottom up, as a result of reaction from private entities. Consequently, often various ways of tracking emerge, proving a certain level of dynamism and enthusiasm.
We don’t have the time to wait for all market players to agree on one tracking system to use. Instead, we need to welcome a multitude of solutions and involvement opportunities, so long as double counting is avoided.
EKOenergy checks the scope of certificate systems before endorsing, so as to avoid double counting. This means:
- One power plant must be registered in one database only. In most cases, underlying contracts with the power plant operators in addition to the publicly available lists of all registered power plants are enough to guarantee that.
- If there are several databases, it must be clear that these serve different purposes. In some European countries, Green Certificate Systems for subsidy reasons, for example, are not used for transferring renewable energy attributes as such. By law, the certificates issued by those databases can’t be used for renewable energy claims.
3. What if the supplier also ‘claims the same rights’?
A bit trickier is the concept of the ‘supplier mix’. If you buy renewable energy, your supplier or your producer can still include these volumes in their ‘overview of total supplied energy’ or ‘overview of totally produced energy’. Your consumption is part of someone else’s calculation too. And yes, there is the risk that another consumer of the same company can refer to the supplier mix to make assumptions about their own consumption.
We oppose the use of the supplier mix as basis for individual claims by the consumers of these suppliers. Nobody would claim they are buying 20% organic produce just because they shop in a supermarket where 20% of the products sold are organic. Unfortunately the Greenhouse Gas Protocol itself lists the supplier mix as a possible source of information for green energy consumers. This is confusing and even incorrect but has to be seen as a reflection of the limited availability of tracking systems at the time of the development of the GHG Protocol.
Anyhow, we shouldn’t let the low possibility of someone making claims based on their supplier’s mix prevent consumers from making green purchases.
4. Can a carbon credit be issued for the same volumes? And what if it has?
Renewable energy markets and carbon offsetting markets have developed independently and have their own registries. Some power plants are indeed registered in both types of registries.
In theory, it is possible that the production of a MWh of renewable energy leads to the issuance of an EAC (Energy Attribute Certificate, proof of renewable energy production) and also to a carbon credit (a proof of greenhouse gas emission reductions compared to a scenario where that renewable energy installation wasn’t there). The avoided carbon can then be sold on the voluntary offsetting market.
From a purely theoretical perspective, ‘avoided carbon’ and ‘renewable energy production’ are such different concepts that even the Greenhouse Gas Protocol Scope 2 Guidance itself doesn’t specify the need to avoid double issuance of both.
“Offsets, and their global avoided emissions claim, represent a different instrument and claim from the energy attributes associated with energy production. Offsets convey tons of avoided CO2 using project-level accounting, but they do not convey information about direct energy generation emissions occurring at the point of production, like contractual instruments do. An offset credit does not confer any claims about the use of electricity attributes applicable to scope 2.” (Greenhouse Gas Protocol Scope 2 Guidance, p. 71)
“Unless otherwise adjusted by local rules, renewable energy generation facilities producing and selling offsets will inherently still provide energy attribute information— directly and indirectly—to other entities in the local energy supply system, including energy consumers reporting scope 2 emissions.” (Greenhouse Gas Protocol Scope 2 Guidance, page 71)
However, this is not a widely accepted practice. Since the publication of the Scope 2 Guidance, practices have developed, which is why EKOenergy doesn’t allow that EKOenergy-labelled volumes are used for carbon offsetting too.
In most cases, sellers of carbon credits and sellers of renewable energy contractually agree that both carbon credits and renewable energy will not be sold separately. I-REC certificates also have an information field specifying whether such a contract has been signed, in order to inform the consumer.
5. What if the energy production has received a form of subsidy?
Often, discussions about subsidies are linked to the discussion about additionality. The reasoning is that if the state (or another entity) pays for a specific production, no one else can make claims on the energy production and therefore no one should be entitled to claim the consumption of that energy. Sometimes elements relating to double counting and unique claims come up as well, since the subsidising agency or authority may see the subsidised part of the energy as theirs. Some find that if energy production has been subsidised by contributions made by energy consumers, these energy consumers should all be entitled to make their fair share of renewable energy claims, and no one should be able to claim that energy exclusively for themselves. Things are even more tricky if subsidies are granted in the way of tradable certificates, e.g. the Elcertifikat in Sweden, the ROCs in the UK or the Renewable Electricity Certificates in Belgium. In such cases it’s very understandable that some find that there is not one single instrument conveying all rights, but several conflicting instruments.
In some cases, the answer is in the country’s legislation. E.g. in Germany: claims on supported renewable energy production is by law attributed to the consumers paying the EEG Umlage, i.e. the subsidy, as part of their regular energy bill. In the USA, a REC can either be used under an RPS system or on the voluntary market, but not on both. In Sweden, Belgium and the UK, legislations specify that the certificates issued as a financing mechanism cannot be used to underpin renewable energy claims – only Guarantees of Origin (REGOs in the UK) can be used for the latter.
When there is no specific regulation or claim made by the authorities in a given country, EKOenergy doesn’t see any issue with private claims with regard to subsidised production.
It’s well known that subsidies for fossil fuels are a lot higher than subsidies for renewable energy, and in that sense subsidies for renewable energy are only an attempt to correct an unequal playing field. It’s also clear that subsidies for renewable energy are efficient. They helped the technology develop and as the number of renewable energy users grow, the costs drop drastically and subsidies become increasingly unnecessary.
Subsidies for renewable energy are a good thing, and we don’t see any reason not to buy subsidised production. In addition, almost all energy tracking instruments also include information on whether the production they cover has been subsidised or not. As such, consumers can easily refine their choice and exclude subsidised production if they prefer.
6. What if the tracking instrument doesn’t explicitly state that all rights are being transferred?
Sometimes there is confusion about the scope of the rights covered by a contract or a certificate system.
The situation has to be interpreted on a case by case basis. How likely is it that in a specific case anyone else is going to claim the other rights?
The most common and likely case is definitely that the contract parties have the ambition to transfer all rights, instead of withholding some rights with the intention of using them in another way. As long as there is no serious reason to doubt about that ambition and intention, and if all other quality criteria are being fulfilled, we accept such agreements as a contractual instrument that can be used under the market-based approach of Scope 2 accounting.
7. Can consumers refer to generated volumes when making claims for their consumption?
It’s misleading to mention investments in renewable energy or ownership of installations when making claims about consumption. When making relevant claims, consumers should always use information based on what they consume, otherwise it’s not clear whether they actually use the energy from those installations or sell the renewable energy/its attributes to other consumers.
We hope you found this overview helpful. If you have any further questions, don’t hesitate to get in touch.
Published: 6 January 2021
