Green-e, a nonprofit organization founded by the Center for Resource Solutions, will certify RECs to ensure that they are properly accounted for and that no double counting takes place. Most companies (82%) report scope 2 SBTs in combination with SBTs for scope 1 (covering direct emissions24) and the rest (12%) in combination with scope 1 and scope 3 SBTs (covering value chain emissions beyond scope 2; ref. We also used CDP data on companies purchased energy (electricity, heat, steam and cooling) and purchased RECs and PPAs (details in Supplementary Section 1). SBTi identifies RECs and PPAs as the two available market-based instruments for meeting renewable electricity targets within its net-zero standard38, although other contractual arrangements exist, such as supplier-specific emission factors, and green power products or tariffs. 14) are based on conservative interpretations (see Supplementary Section 1 for details). From that perspective, individual companies can legitimately use RECs to report emissions reductions that do not reflect a global emission reduction, as the market-based emissions of all energy users on the grid sum to total grid emissions. Energy Policy 63, 11111125 (2013). In fact, fossil fuels make up three fourths of human-caused emissions over the past 20 years. To meet those stakeholder demands, corporations need to procure Energy Attribute Certificates, which are called Renewable Energy Certificates (RECs) in the United States (and often referred to as "renewable energy credits"). 3b, most companies in our sample (94%) do not have SBTs specifically for scope 2. This EAC type is easy to purchase for corporate buyers, but its pricing is intransparent. Official websites use .gov Claudia Kemfert, Fabian Prger, Hanna Brauers, Julianne DeAngelo, Ins Azevedo, Steven J. Davis, Benjamin K. Sovacool, Patrick Schmid, Gordon MacKerron, Sarah M. Jordaan, Andrew W. Ruttinger, Arvind P. Ravikumar, Evangelos Panos, Ramachandran Kannan, Tom Kober, Nature Climate Change We also distinguish here between RECs and power purchase agreements (PPAs), which represent a long-term commitment by a company to purchase power from a particular renewable energy project. Our study shows that the common voluntary corporate practice of using RECs that are unlikely to drive additional renewable energy production casts serious doubt on the veracity of reported corporate emission trajectories and their apparent alignment with the most ambitious Paris Agreement temperature goal. Greenhouse GasesPart 2: Specification with Guidance at the Project Level for Quantification, Monitoring and Reporting of Greenhouse Gas Emission Reductions or Removal Enhancements (International Organization for Standardization, 2019); https://www.iso.org/standard/66454.html, CDP 20102020 Annual QuestionnaireInvestor and Supply Chain Version. Energy 63, 452457 (2014). 2022 showed us just how much electricity prices fluctuate and how fast they can skyrocket. These products are usually month-to-month renewable options offered at a price premium on existing electricity bills, with the utility sourcing these products from either a utility-owned clean energy asset or a third-party-owned clean energy project in the local grid. Unbundled energy attribute certificate: An energy attribute certificate that is separate, and may be traded separately, from the underlying energy produced. 3a). In this study we assessed the use of RECs by companies with SBTs and the implications for their Paris alignment claims. "@type": "SearchAction", Meanwhile, unbundled EACs are typically sold by third-party retailers who do not provide physical electricity. For consumers, the choice depends on their own needs. The main benefit of PPAs and the associated EACs is hedging. What are unbundled EACs for corporate buyers and independent power producers? The data behind all figures are available in the Supplementary Spreadsheet. Using renewable energy contributes to a positive brand image and builds relationships with the community, employees, and other stakeholders. Renewable energy transactions involve substantial risk of loss, and parties are strongly advised to consult with professional and legal advisors prior to entering into any given transaction. The RECs with a higher carbon-reduction impact are typically more expensive than RECs with a lower impact, like those produced in an already clean grid. J. Ind. The corrections of \({\mathrm{aSBT}}^{\prime}_{{\mathrm{S2}}}\) for these five companies had a modest influence on results, causing the aggregated REC.cumES2 (illustrated in Fig. For companies with multiple SBTs covering different emissions scopes and target years, we selected a single SBT, prioritizing targets specifically for scope 2, when available (otherwise, we prioritized targets for scopes 1 and 2 combined over targets for scopes 1, 2 and 3 combined), followed by prioritization of the shortest target time span (that is, the difference between the base year and target year). Aligning corporate greenhouse-gas emissions targets with climate goals. Therefore, unbundled EACs are one of the major channels used for fulfilling corporate buyers sustainability and climate strategy. Unbundled certificates, on the other hand, allow a variety of actors from multinationals to NGOs and private citizens to consume clean power and use their money to support renewable energy producers regardless of their budget. Finally, we aggregated REC.cumES2 for all market-based SBTs and compared it with the aggregated cumES2 for all market-based SBTs and the aggregated cumES2 for all location-based SBTs. What are Energy Attribute Certificates (EACs), The difference between bundled and unbundled EACs, What are the benefits of buying bundled and unbundled EACs. Energy attribute certificates (i.e., REC) Avoid double counting and double claiming Credible claims - consumer protection Incremental green power use (surplus to regulation) Standards for resource quality and content in North America. in enerGy AttriBute certificAtes And clAims 78 10.1 Introduction to energy attribute tracking 79 10.2 Defining energy attribute certificates 80 10.3 Certificate uses 84 10.4 Supplier disclosure 84 10.5 Supplier quotas, for the delivery or sales of specific energy sources 85 10.6 Tracking tax/levy exemptions 86 10.7 86Voluntary consumer programs and the Concordia University Horizon Fellows Program (A.B.). Most companies are entering into the renewable energy market because their customers, leaders, and stakeholders want to see them have more sustainable practices. First, SBTi could require all companies to use only location-based accounting. About the Scheme. Promoting your companys commitment to renewable energy, Using renewable electricity without installing costly facilities such as solar panels, Building stronger relationships with community and encouraging dialogue about renewable energy. 1a). While PPAs deliver many benefits, they only make sense for companies with utility-scale consumption. Some stakeholders might also reject the use of market-based instruments altogether, whether additional or not, as this way of claiming to be supplied by renewable energy does not reflect how renewable energy supply relies on a broader system of grid-balancing, back-up capacity and transmission services, which are often supported by tax payers or other energy consumers10. A REC always represents 1 MWh of renewable electricity. More broadly, there is a need to critically consider the extent to which voluntary corporate actions can be relied on for achieving a Paris-aligned transition5. in France, the European Energy Exchange (EEX) provides a platform (called Powernext) where sellers offer their European EACs within an auction. A.B. false. They provide a simple way to support renewable energy generation and offset your carbon emissions. However, these regional differences substantially reduce after adjusting the targets for estimated future RECs purchases (see Supplementary Fig. 4) to change from 97MtCO2e to 101MtCO2e. Ecol. Use the Previous and Next buttons to navigate the slides or the slide controller buttons at the end to navigate through each slide. This would also be the case in a situation with complete reporting. You are using a browser version with limited support for CSS. In other words, unbundled EACs facilitate access to renewables and encourage widespread participation in the energy transition. EACs represent the environmental attributes of 1 MWh of power produced from clean energy projects and can be sold separately from electricity (renewable energy certificates (RECs) are a type of EAC). RECs are used to track and assign ownership to renewable electricity generation and use. LevelTen Energy, Inc. and its affiliates (LevelTen) provides a renewable energy marketplace and platform comprising certain proprietary software, data analytics, contract templates, and related tools and processes, to aggregate renewable energy buyers and sellers, allowing the parties to connect and transact efficiently (the LevelTen Platform). When you retire a REC through the associated tracking system, it cannot be sold again, which means no one else can lay claim to that unit of renewable generation. If GSA has not established an AWC in the utility service territory of an agency site, then the agency must request a delegation of authority from GSA. Fossil fuels also cause pollution, contributing to climate change. GSA has delegated this authority to the DOD, including DLA Energy, and DOE. We acknowledge that this second issue raises a related and broader limitation with the use of standard corporate emissions accounting (whether market- or location-based), in that changes in emissions outside of the scopes 1, 2 and 3 accounting boundary are not shown. For further assistance in identifying a sites electricity market type and evaluating off-site purchasing options, submit a request through the FEMP Assistance Request Portal. Energy Attribute Certificates (EACs) allow businesses to track the origin of electricity, prove the consumption of renewables, and meet clean energy targets. Scenario Analysis Notebooks for the IPCC Special Report on Global Warming of 1.5C (International Institute for Applied Systems Analysis, 2018); https://doi.org/10.22022/SR15/08-2018.15428. Though RECs and electricity are produced concurrently, the two "products" are severable and represent different revenue streams for project developers. Get the most important science stories of the day, free in your inbox. Lorem ipsum dolor, sit amet consectetur adipisicing elit. 1h) reduced from 77.1 to 69.2MtCO2e per year (10.3%) over the period, far less than the reported market-based emissions. Res. To obtain However, most of this reported emission reduction is caused by the companies use of RECs (Fig. A research roadmap for quantifying non-state and subnational climate mitigation action. Being able to choose exactly where you buy renewable energy fromlocally or anywhere else in the U.S. Monyei, C. G. & Jenkins, K. E. H. Electrons have no identity: setting right misrepresentations in Google and Apples clean energy purchasing. For example, electricity consumers can buy bundled EACs directly from power producers. "url": "https://energy-attribute-certificates.com/", Current greenhouse gas accounting standards allow companies to use renewable energy certificates (RECs) to report reductions in emissions from purchased electricity (scope 2) as progress towards meeting their science-based targets. Agencies should contact GSA at. Sign up for the Nature Briefing newsletter what matters in science, free to your inbox daily. Energy markets are volatile. However, experience from carbon-offsetting markets shows that demonstration of additionality is complicated and often contested33 and more research and method development may therefore be needed for this option to be viable. Companies headquartered in Europe and North America (88% of the sample) reported larger combined market-based emission reductions in 20152019 than companies based in Asia (11% of the sample), but also relied more on RECs in their reporting. For example, we looked at REC prices in Pennsylvania, Maryland, and New Jersey following the Minimum Offer Price Ruling (MOPR) in December 2019, which was expected to negatively impact renewable energy projects in the PJM market. Assessing the rapidly-emerging landscape of net zero targets. EPA Green Power Pricing- historical pricing is also available. Buying RECs also supports the renewable energy market, which encourages renewable electricity on a broader scale. To account for the reported use of RECs between b and y, we used b instead of B in equation (17) for this company. Under these contracts, the buyer typically agrees to purchase clean electricity from a clean energy provider that is not the utility. See a list of clean energy purchasing programs offered by vertically integrated utilities. Ecohz developed a digital platform that enables companies to reduce Scope 3 emissions and gives suppliers easy access to documented renewable energy. Walenta, J. Once a generator releases energy onto the grid through transmission lines, the electrons simply follow the path of least resistance. Following SBTi, we here apply the annual emission reduction rates of the two SBTi pathways (4.2% and 2.5%, respectively) as references to evaluate the Paris alignment of past corporate emission trajectories (20152019) and future targeted trajectories (median values 20172030) for the 115 companies. The start year (2015) aligns with the publication of the Greenhouse Gas Protocol standard related to market-based accounting (see Box 1)9, the introduction of a distinction between market- and location-based scope 2 emissions in the CDP questionnaire40 and the approval of the first SBTs by SBTi7. This is unlikely to occur (the median Y is 2030) and we therefore assumed that these companies will stop reducing scope 2 emissions when they reach a value of zero. In a nutshell, Energy Attribute Certificates (EACs) are instruments that track the origin of renewable electricity and its environmental attributes. If investing in local renewable energy is important to you, you may want to purchase RECs from outside supplies so that you can check where they were generated. Lui, S. et al. This article is the first in the series, and covers the basics. Based on the existing empirical evidence, we assume that this part of the reported reduction does not reflect actual reductions of emissions from the energy grid. Although empirical evidence is still needed, we have adopted here the common assumption that PPAs do lead to additional renewable energy production and real emission reductions, as the long-term power price de-risks new projects and allows access to project finance14,15,17,18 (Box 1). Thus, EACs permit generators and consumers to follow a volume of renewable power injected as physical charge and extracted in another location. Energy Policy 99, 100109 (2016). A recent analysis of the European market done by Ecohz showed that EACs, known in the region as Guarantees of Origin (GO), could raise 57 billion EUR for investments in clean power, enough to secure close to half of the additional production the EU needs to reach its 2030 climate goals. The project may be utility- or third-party-owned. Reducing your carbon footprint, contributing less to pollution and climate change. Access to or use of the information contained herein does not establish a client or customer relationship with LevelTen within the meaning of any applicable laws or regulations. We are very thankful for the valuable feedback of the three anonymous reviewers. Taken together, the implication of this future emission scenario is that an estimated 42% of the committed cumulative scope 2 emission reductions (101MtCO2e) from base year to target year will come from REC purchases and hence may not reflect actual reductions of global emissions (Fig. and M.B. Sell the projects power and associated RECs to a corporate purchaser under a virtual PPA (VPPA). Clim. Clim. The companys location-based emissions are also reduced due to the lower grid average emission factor from the reduced generation from coal. Under the Greenhouse Gas Protocol9, companies are required to report their scope 2 emissions using both market- and location-based accounting. 1b) and to a lesser extent by a net-increase in company use of PPAs (Fig. Unbundled RECs are RECs that aren't paired with the underlying electricity (see our Introduction to RECs article for more information). A lock (LockA locked padlock) or https:// means youve safely connected to the .gov website. The trend is especially pronounced for SBTs covering scopes 1 and 2, where the median annual reduction is 1.7 percentage points higher for market- over location-based SBTs (4.2% versus 2.5% of base year emissions). hydropower plant, wind power plant, solar plant), the actual powerplant where the renewable electricity has been produced (ie. And although that correlation may be complex, companies that sign PPAs are generally recognised as essential to the deployment of additional renewable capacity. However, this law reduces the incentive for green power suppliers to conclude PPAs. 12, 539546 (2022). clean home energy solutions affordable and accessible to all. 1113 for a contribution analysis of our company sample). While PPAs deliver many benefits, they only make sense for companies with utility-scale consumption. However, as markets mature and demand grows, EACs have been shown to generate significant income that is already substituting subsidies in the construction of new electricity production devices. the movement of the headquarters of the Russian Empire to St. Petersburg allowed that city to become a (n): forward capital. In contrast, fossil fuels such as oil and gas are finite, meaning there is a limited supply. The contracts are usually longer-term and offer the ability to save money over time. Renewable Energy Certificates: Background & Resources October 21, 2008 . 501 (FAR Part 41) to prescribe policies and methods governing the acquisition and supply of utility services for Federal agencies. Here we show that the widespread use of RECs by companies with science-based targets has led to an inflated estimate of the effectiveness of mitigation efforts. For example in France, the European Energy Exchange (EEX) provides a platform (called powernext) where renewable energy producers offer their . The main goal of the city of Moscow should be ide to prov digital solutions that help advance urban sustainable development and promote inclusive development. In Year 1, the company has the same market- and location-based emissions as it does not purchase any RECs or enter into any PPAs, and because the grid average and residual emission factors are the same (as no grid customers purchase RECs from or enter into PPAs with the local windfarm). There are at least two alternatives that would make it more likely that all reported scope 2 emission reductions are real and renewable energy generation is only counted once (see Table 1). Agencies should contact FEMP for additional information on the different procurement vehicles available to the Federal government. a, SBTs as reported by companies, covering different emissions scopes and emission accounting approaches. Are you browsing the renewable energy market and struggling with definitions? Climate risk assessments and science-based targets: a review of emerging private sector climate action tools. Quibusdam voluptas delectus recusandae blanditiis illo distinctio autem, ab officia itaque incidunt harum ex, laborum aperiam laboriosam, dolorum iusto esse! Below is a brief description of the two electricity market types. When a REC is sold together with its associated energy, it is called a bundled REC. A timely new approach The GO system, for example, was established only two decades ago. Most companies (89%) state that their SBT refers to market-based accounting, whereas the SBTs of the remaining 11% refer to location-based accounting (in short, market- and location-based SBTs). Soc. By contrast, the increase in energy consumption had a net-positive contribution to the change in emissions (Fig. However, the potential use of RECs may overstate the apparent Paris goal alignment of the market-based SBTs. Cost Savings Potential: None, average premium is 1.5 cents/kWh, Contract Length: Shorter contract terms (e.g., month-to-month), Choice of Generating Technology: None, utility determines technology mix, EAC Ownership: The EACs are typically conveyed to the buyer or retired on their behalf. Hamburger, . These Guarantees of Origin are then bundled Green Tariffs or merchant Power Purchase Agreements (merchant PPA, also known as a utility PPA). The role of natural gas in reaching net-zero emissions in the electric sector, The expansion of natural gas infrastructure puts energy transitions at risk, Energy systems in scenarios at net-zero CO2 emissions, Differences in carbon emissions reduction between countries pursuing renewable electricity versus nuclear power, Decarbonization efforts hindered by Chinas slow progress on electricity market reforms, Measuring corporate Paris Compliance using a strict science-based approach, Global mitigation opportunities for the life cycle of natural gas-fired power, Safeguarding the energy transition against political backlash to carbon markets, An assessment of energy system transformation pathways to achieve net-zero carbon dioxide emissions in Switzerland, https://doi.org/10.1007/s40641-022-00182-w, https://sciencebasedtargets.org/resources/files/SBTi-Corporate-Manual.pdf, https://sciencebasedtargets.org/companies-taking-action/, https://sciencebasedtargets.org/resources/files/SBTiProgressReport2020.pdf, https://www.theccc.org.uk/publication/corporate-procurement-of-renewable-energy-implications-and-considerations/, https://newclimate.org/2022/02/07/corporate-climate-responsibility-monitor-2022/, https://www.ukgbc.org/ukgbc-work/renewable-energy-procurement-carbon-offsetting-guidance-for-net-zero-carbon-buildings/, https://resource-solutions.org/wp-content/uploads/2016/03/How-RECs-Make-a-Difference.pdf, https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf, https://sciencebasedtargets.org/resources/files/SBT-Tool-v1.2.1.xlsx, https://cdm.unfccc.int/methodologies/PAmethodologies/tools/am-tool-01-v7.0.0.pdf, https://www.ukgbc.org/ukgbc-work/net-zero-carbon-buildings-a-framework-definition/, https://www.bloomberg.com/professional/solution/bloomberg-terminal/, https://sciencebasedtargets.org/resources/files/Net-Zero-Standard.pdf, https://www.cdp.net/en#a8888e63070314c2285625253a462815, https://sciencebasedtargets.org/resources/files/foundations-of-SBT-setting.pdf, https://doi.org/10.22022/SR15/08-2018.15428, Electricity accounting in life cycle assessment: the challenge of double counting, Planning sustainable carbon neutrality pathways: accounting challenges experienced by organizations and solutions from industrial ecology, Renewable energy certificates allow companies to overstate their emission reductions. The LevelTen Platform is not designed or intended to allow users to place orders or enter into self-executing transactions within the Platform, and the offer, acceptance and contracting process for all transactions shall take place directly between buyer and seller, in their sole discretion, with the LevelTen Platform merely providing tools and information to help facilitate such transactions. Sold as separate products, EACs become a source of revenue for renewable energy producers and allow consumers to choose what type of energy they wish to support with their purchases. Reported location-based emissions (black line in Fig. 9). We next estimated the SBTs specifically for scope 2 (Fig. In short, you can claim to use renewable energy no matter where your RECs come from. The SBTs in the SBTi database generally contain the following data of relevance to this study: sector, emission metric (absolute or intensity-based), emission scope (1, 2, 3 or a combination), base year, target year and targeted percentage reduction in the emission metric. However, not all options are available in both market types. All equations are given in Methods and we used Microsoft Excel for the analysis. Hence, market-based emission disclosures give the impression that three-quarters of the companies were in alignment with one of the Paris goals. Voluntary REC markets are almost exclusively driven by climate-related sustainability goals, making them more common for corporate clean energy purchasers. Vertically Integrated Markets: In vertically integrated markets, the General Services Administration (GSA) has established areawide contracts (AWC) with utility service suppliers to cover utility service needs of Federal agencies within the franchise territory of the supplier. By contrast, the estimated location-based scope 2 SBTs only barely comply with the well below 2C goal collectively (the weighted average reduction rate is 2.7% of base year emissions). Department of Management, John Molson School of Business, Concordia University, Montral, Quebec, Canada, Department of Geography, Planning and Environment, Concordia University, Montral, Quebec, Canada, Loyola Sustainability Research Centre, Concordia University, Montral, Quebec, Canada, Anders Bjrn,Shannon M. Lloyd&H. Damon Matthews, Centre for Business, Climate Change and Sustainability, University of Edinburgh Business School, Edinburgh, UK, You can also search for this author in The PPA gives the company the right to apply an emission factor of zero to 100MWh of its electricity consumption, and the residual grid factor (which decreases slightly due to the reduced generation from coal) is applied to its remaining electricity consumption. Those generators are then free to pass on the RECs they receive to another entity. Renewable energy certificates (RECs) give companies, institutions, and individuals a simple way to offset their carbon footprint and support clean energy. volume12,pages 539546 (2022)Cite this article. Quibusdam voluptas delectus recusandae blanditiis illo distinctio autem, ab officia itaque incidunt harum ex, laborum aperiam laboriosam, dolorum iusto esse! Environ. Schneider, L. Assessing the additionality of CDM projects: practical experiences and lessons learned. EACs represent the environmental attributes of 1 MWh of power produced from clean energy projects and can be sold separately from electricity (renewable energy certificates (RECs) are a type of EAC). Google Scholar. At the industry level, only companies in materials, hospitality and biotech, health care and pharma (together accounting for 21% of the sample companies) aligned with the 1.5C goal in aggregate after adjusting the emission trajectories for RECs (see Supplementary Fig. Being able to choose exactly where you buy renewable energy fromlocally or anywhere else in the U.S. For example, for companies that increased their use of PPAs over the period adjusted market-based emissions commonly aligned with a more ambitious temperature goal than location-based emissions. As shown in Fig. Unbundled Energy Attribute Certificates (EACs) are certificates where the renewable energy seller sells the EAC separately from the underlying energy output to a third party. ISSN 1758-678X (print).
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