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Commentary by Melissa Lott, Abraham Silverman, Qëndresa Krasniqi + 2 more • December 04, 2023
This commentary represents the research and views of the authors. It does not necessarily represent the views of the Center on Global Energy Policy. The piece may be subject to further revision.
The Center on Global Energy Policy would like to thank Google for their gift to CGEP in support of research related to GHG accounting and power sector decarbonization. Contributions to SIPA for the benefit of CGEP are general use gifts, which gives the Center discretion in how it allocates these funds. More information is available at Our Partners. Rare cases of sponsored projects are clearly indicated.
The Center on Global Energy Policy gratefully acknowledges the partnership of dialogue facilitators Kite Insights and student research workers Riley Chodak, Tom Jouvet, Augustin LaCroix, Noyna Roy, and Jiani Wang.
This series was not commissioned, sponsored, or supported by WRI in any way.
The Greenhouse Gas Protocol (GHGP) was originally designed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) in 1998 to provide public and private sector organizations in the United States tools for measuring and reporting their greenhouse gas emissions. Since then, it has expanded to include standards, guidance, and trainings that hundreds of organizations draw on in seeking to fulfill their climate commitments. These commitments can support accelerated progress toward achieving broader climate change mitigation goals (e.g., net-zero targets) if they result in real and permanent emissions reductions. But as more organizations turn to the GHGP for guidance on tracking their own emissions, they have raised questions as to whether the GHGP in its current form is still fit for that purpose or, if not, how it can be updated.
As a response to such questions, in 2022 WRI and WBCSD initiated a process for reexamining the long-standing GHGP. Because this process is technically complex, requiring extensive stakeholder engagement through online surveys and an open call for proposals as well as technical analysis of the merits of proposed solutions for real emissions reductions, it risks the creation of echo chambers where similarly minded groups provide input but dialogue is absent.
In 2022–23, the Center on Global Energy Policy (CGEP), Columbia University SIPA held a series of five workshops aimed at fostering such a dialogue in support of the larger goal of identifying potential improvements to the GHGP that WRI and the organizations that participate in future working groups may wish to consider. Participants included a diverse group of stakeholders in the GHGP, including representatives of WRI, though the series was not commissioned by WRI. Topics discussed included the overall purpose of the GHGP; proposed changes to Scope 2 and (separately) Scope 3 accounting and reporting; the overall policy and regulatory landscape affecting norms for greenhouse gas accounting and reporting beyond the GHGP, including the development of e-liability; climate justice and the implications of equivalences; and the potential impacts of proposed changes to the GHGP, specifically for Scope 2 and Scope 3.
CGEP has published a summary of these workshops separately.[i] This commentary reflects on the insights that emerged from them. These insights focus on electricity sector emissions due to their significant role in current total emissions as well as the electricity sector’s large role in pathways to achieving net zero. At a high level, this commentary identifies six areas that WRI could prioritize in its ongoing reexamination process and presents a set of recommendations for each.
These areas include:
1. The stakeholder “tradeoffs” lens
2. The allocation of emissions
3. Mapping emissions and defining the relevant market
4. Temporal considerations
5. Accounting treatment of resources built during the development of and transition to new GHGP rules
6. Geographic diversity in grid data
The commentary also discusses the potential value of future partnerships with fellow convening organizations in terms of leading specific work streams or building understanding and constructive dialogue across stakeholder groups around particular issues.
The group of stakeholders in the workshop series was diverse, and individuals frequently lacked familiarity with each other’s business models, never previously having interacted or crossed paths. Organic conversations followed a somewhat predictable pattern: establishing a shared baseline, probing for the parameters of a problem, identifying subsets of problems or solutions, and then prioritizing them based on their merits. In these conversations, stakeholders frequently discussed specific problems of their field without explicitly stating their individual contexts and any biases attached to them (e.g., “I come from agriculture, and so…”). Sharing language, definitions, and/or parameters, they would initially assume agreement or alignment on a given problem or solution. Before long, though, they would realize that the implications of that problem or solution for their specific organization, industry, or region might actually put them at odds with other stakeholders. In essence, stakeholders had different understandings of shared problems and also potential solutions based on their individual contexts or needs.
Participants in the workshop series generally agreed that the existing Scope 2 market-based model has incentivized the deployment of wind and solar generation and gigawatt-scale investments in clean energy technologies. However, participants suggested that Scope 2 accounting is not incentivizing enough investment to support ambitions related to the Paris Climate Agreement (i.e., rapidly reducing emissions to net zero while limiting cumulative greenhouse emissions to the point where global average temperature rise is limited to well below 2°C). They also expressed concerns that the current GHGP is not accurately measuring emissions from electricity use, which, depending on the context, could lead to either undercounting or double counting.
One potential response to these concerns could be an approach in which all entities use a common framework of responsibility and comparable methodology to their consumption. The former would require that all entities use the same locational grid data over a specified time period for settlement. The latter would ensure that the sum of emissions from electricity production that is allocated to each user of a given electricity system equals 100 percent of total system emissions (i.e., the total emissions across all consumers would equal the emissions produced on a pool-wide basis, adjusted for imports/exports and behind-the-meter production and consumption). The share could be weighted by carbon intensity or other metrics, while accounting for all greenhouse gas emissions across the relevant market.
Related to this, current consumer commitments to reduce greenhouse gas emissions frequently involve procuring 100 percent renewable electricity on an annual basis (i.e., contracting for the amount of kilowatt-hours the consumer uses over the course of a year). However, as shown in a previous analysis by CGEP,[ii] this approach may not mean that a company actually reduces its power carbon footprint to zero due to timing mismatches between when a consumer uses electricity and when that electricity is produced. This previous analysis estimated that companies that contract for 100 percent renewables draw between 20 and 50 percent of their annual electricity from the regional electric grid, depending on their location, demand profile, and mix of contracted renewable supplies.
Including emissions from the residual system mix is a critical component of individual customer greenhouse gas accounting. In these calculations, “residual system mix” represents the carbon intensity of any resources that emit greenhouse gases and takes into account any resources needed to ensure the reliability of the grid (e.g., what’s needed for resource adequacy, ancillary services, and other related services). Put another way, these resources make sure that electricity supply is enough to meet the customer’s demand at any instant in time. Batteries can provide some of these services, but other electricity supply technologies—in addition to variable renewables—are likely needed to support a reliable, affordable, and low-carbon electricity system. This accounting approach can provide strong investment signals that target high emission hours and support investments in electricity markets that have emissions-intensive residual system mixes. This approach could also help to avoid the situation in which customers take credit for purchases of clean energy that do not, in practice, result in reducing their emissions to zero.
One potential pathway forward is to determine the impact of clean energy purchases by the entity on the residual system mix by looking at the short-run or long-run marginal carbon intensity of the grid at the time when the energy was produced, or on the basis of another temporal metric as discussed in greater detail below.
Consider adopting a principle that the sum of emissions from electricity generation allocated to each user of a given electrical system should equal 100 percent of total system emissions.
Consider adopting a principle that the sum of emissions from electricity generation allocated to each user of a given electrical system should equal 100 percent of total system emissions.
While electricity that is purchased by but not deliverable to a particular customer may contribute to a cleaner electricity system overall, it is unlikely to entirely eliminate the greenhouse gases attributable to the purchasing entity. Furthermore, the current practice of allowing a megawatt-hour for megawatt-hour offset based on today’s framework of annual accounting and wide geographic boundaries is unlikely to support total decarbonization of the power grid and could result in double counting of emissions reductions, something that critics have called greenwashing. The importance of geographic matching was highlighted in a report by CGEP[iii] that also found that hourly matching is essential to achieving net-zero goals at a company level.
Any type of deliverability metric would likely require defining the electrical boundaries of the relevant market (i.e., the footprint of a purchasing entity) in which the load is located and measuring emissions from resources within the relevant market. In general, smaller (i.e., more granular) market boundaries would be preferred over larger zones. It is reasonable to suggest that:
Consider adopting an emissions reporting approach that starts by defining the relevant electrical boundaries of the market or utility area in which each electricity consumer operates. Preference should be given to more granular market definitions when possible, given available data.
Moving away from the current annual netting periods (e.g., use of weekly, monthly, seasonal, peak versus off-peak, or other possible comparable measurements given data availability and other practical constraints) and toward hourly periods would likely represent an improvement over the current approach. Among the workshop participants, most agreed that hourly matching of electricity consumption and generation was preferable and, in most (if not all) situations, possible.
Moving toward more precise temporal requirements is likely to be increasingly important, particularly in areas of the electricity grid that are already low carbon or have predictable daily or seasonal emissions profiles. An hourly requirement has the potential to send consumers of electricity a price signal that provides more carbon mitigation credit for actions that result in more emissions reductions (e.g., investments that produce zero-carbon electricity that directly displaces high emissions electricity generation). Hourly requirements may also encourage reporting entities to shift the timing of their electricity consumption from windows when the grid is producing high levels of emissions to windows when the grid is producing lower levels of emissions.
One option for addressing temporal variability is to adopt a carbon-indexed emissions accounting model that “weights” clean energy investments based on their impact on the real-time carbon emissions rate in the relevant electricity market. Carbon-weighting addresses a key concern of convening participants that current carbon accounting regimes do not differentiate between clean energy investments that have limited carbon reduction benefits and those that drive substantial carbon reductions.
This type of carbon-weighting approach recognizes that—from the perspective of emissions mitigation—capital investments that result in production of energy when the real-time carbon intensity of the grid is high is preferred over investments that lead to additional production of low-carbon electricity when the grid is already relatively clean. Thus, it is reasonable to say that a carbon-weighted allocation would incorporate two data points:
Where these data are available, they should be utilized and would result in greenhouse gas accounting metrics that reward electricity production that has higher environmental impact. Using a carbon-emissions rate could fulfill the need for a transparent and replicable carbon tracking mechanism that can achieve many of the hourly and locational matching goals cited by participants in CGEP’s prior convenings and publicly available Scope 2 survey feedback to WRI.[iv]
Consider moving toward weighting the carbon intensity of consumption and production as the basis for carbon accounting based on hourly carbon intensity metrics at individual points on the electric grid. If real-time data are not available due to data limitations or other significant practical considerations (e.g., timelines for obtaining real-time data), a preference should be given to hourly data or the most granular period of time for which data is available (e.g., use of weekly, monthly, seasonal, peak versus off-peak, or other possible comparable measurements).
Among the most contentious issues discussed by workshop participants was the role of “additionality” requirements in greenhouse gas accounting: many viewed additionality requirements as preferable but logistically challenging to implement. A move by GHGP toward requiring consumers to invest in new zero-carbon generation in order to take carbon accounting credit could help to overcome some of these challenges.
The authors believe additionality requirements tend to make existing resources less valuable for carbon compliance and incent investment in new resources. Numerous studies have pointed out that additional clean energy attribute purchases do not necessarily translate into better environmental outcomes unless they induce investment in new clean energy resources that would not have been built without a particular set of actions and/or incentives,[v] while economic theory argues that clean megawatts are fungible and that, so long as demand outstrips supply, the price of clean energy will rise to match the long-run cost of adding additional supply.
Thus, the question of whether any given purchase of clean energy attributes will elicit new investments is a complicated and thorny one that could warrant an additional workshop series and further research. In particular, care should be given to questions around what constitutes “new” supply (i.e., do repowerings or uprates count) and how any additionality requirements would affect incentives to maintain existing equipment. Research should also consider how any additionality requirements would affect corporate willingness to continue to invest in early-to-mid-stage clean energy developments. Since the GHGP revision process is ongoing, “new” investments may become “existing” investments by the time the process is completed. Therefore, regardless of whether the GHGP eventually requires a showing of additionality, the way investments made during the development of and transition to any new rules are treated may be an area of immediate commercial concern to GHGP participants. It is reasonable to think that uncertainty regarding the treatment of near-term investments in the updated GHGP could lead clean energy investors to pull back on new investments until the updates are finalized.
One option for addressing this issue could be to allow investments made prior to finalization of the revised GHGP to lock in the current accounting treatment for a set number of years to ensure that investments continue to be commercially attractive, even during the transition period. Of course, the benefits of such a move would need to be weighed against the added complexity of the accounting process and the reality that some investments would be treated as “new” even though they may have been operating for years and therefore are part of the greenhouse gas emissions baseline.
Consider providing express guidance on how investments made during the period of pending revisions are treated, with the goal of ensuring that investments in clean energy continue throughout what is expected to be a lengthy standards development process.
There is a significant gap in the availability of data and mechanisms to track renewable energy generation, including time and location matching, in many parts of the globe. High-data access markets are those with access to high-quality sources of data, including nodal or zonal pricing and granular energy attribute tracking. Conversely, low-data access markets have less access to transparent data and/or lack access to granular carbon intensity data. This diversity in data availability between regions leads to a risk of “cherry-picking,” where organizations pick the reporting methodology that produces the most favorable greenhouse gas emissions outcomes.
Relatedly, a major benefit of the GHGP is its ability to compare corporate operations in various localities and select the areas with the lowest carbon intensity. This also relates to ongoing conversations around the potential for carbon border adjustment policies. Care will need to be taken to ensure that there is a common “translation factor” between high-data access markets and low-data access markets.
1. Consider requiring organizations to use the most sophisticated data available in each region where they operate.
2. Develop protocols for markets with access to abundant grid data and alternative methodologies for regions for which less information is available (i.e., a phased approach).
3. Address markets that may be moving from low-data access to high-data access, including those that are deploying global databases and improving the reporting scheme for greenhouse gas emissions or that are in the process of deploying smart meters or comparable electricity tracking hardware and software.[vi]
[i] Qëndresa Krasniqi and Jackie Ratner, “The Future of the Greenhouse Gas Protocol: Workshop Series Summary,” Center on Global Energy Policy, August 2023, https://www.energypolicy.columbia.edu/the-future-of-the-greenhouse-gas-protocol-workshop-series-summary/.
[ii] Melissa Lott and Bruce Phillips, “Advancing Corporate Procurement of Zero-Carbon Electricity in the United States: Moving from RE100 to ZC100,” Center on Global Energy Policy, December 8, 2021, https://www.energypolicy.columbia.edu/publications/advancing-corporate-procurement-zero-carbon-electricity-united-states-moving-re100-zc100/.
[iii] Lott and Philips 2021, https://www.energypolicy.columbia.edu/publications/advancing corporate-procurement-zero-carbon-electricity-united-states-moving-re100-zc100.
[iv] World Resources Institute, “Greenhouse Gas Protocol Standards Update Process: Detailed Summary of Responses from Scope 2 Guidance Stakeholder Survey,” July 2023, https:// ghgprotocol.org/sites/default/files/2023-07/Scope%202%20Survey%20Feedback%20 Draft%20Summary.pdf.
[v] Anders Bjørn, Shannon M. Lloyd, Matthew Brander, and H. Damon Matthews, “Renewable Energy Certificates Threaten the Integrity of Corporate Science-Based Targets,” Nature Climate Change 12, 2022, https://www.nature.com/articles/s41558-022-01379-5; Michael Gillenwater, Xi Lu, and Miriam Fischlein, “Additionality of Wind Energy Investments in the U.S. Voluntary Green Power Market,” Renewable Energy 63, March 2014, https://doi.org/10.1016/j.renene.2013.10.003; Ákos Hamburger and Gábor Harangozó, “Factors Affecting the Evolution of Renewable Electricity Generating Capacities: A Panel Data Analysis of European Countries,” International Journal of Energy Economics and Policy 8, September 2018, https://www.econjournals.com/ index.php/ijeep/article/view/6557; New Climate Institute, “Corporate Climate Responsibility Monitor 2022: Assessing the Transparency and Integrity of Companies’ Emission Reduction and Net-Zero Targets,” 2022, https://newclimate.org/2022/02/07/corporate-climate-responsibility monitor-2022/.
[vi] Ting Wei, Junliang Wu, and Shaoqing Chen, “Keeping Track of Greenhouse Gas Emission Reduction Progress and Targets in 167 Cities Worldwide,” Frontiers in Sustainable Cities 3, July 2021, https://www.frontiersin.org/articles/10.3389/frsc.2021.696381/full; Rahul Tongia, “Why Renewable Energy Is Harder in India than in Other Countries,” Brookings, May 21, 2014, https://www.brookings.edu/articles/why-renewable-energy-is-harder-in-india-than-in other-countries/.
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Commentary by Melissa Lott, Abraham Silverman, Qëndresa Krasniqi + 2 more • December 04, 2023