2 steps CSOs can take regarding Scope 2’s greenhouse gas protocol

The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.​

There are two days left for CSOs everywhere to provide their from-the-market perspectives on the Greenhouse Gas Protocol (GHGP) Scope 2 proposed changes.

While all the changes are important to understand, the biggest debate centers on whether the market-based method (MBM) of accounting should require companies to match their clean energy procurements to their energy use on an hourly basis (instead of annually) and within much smaller market boundaries (instead of national boundaries).

I’ve been working on voluntary clean energy procurement for 25 years, and it’s always been clear to me that large energy buyers need to focus their efforts on energy procurement that decarbonizes the whole grid, not just their own buildings.  

The vast majority of market experts and energy users oppose the GHGP’s proposed change that would make hourly and location matching mandatory because it could raise household energy prices by 26 percent, will raise clean energy prices for companies so much that it could kill voluntary clean energy procurement, and could drive greenhouse gas emissions up, not down, and quite substantially. In fact, one study found that removing market boundaries for corporate clean energy procurement could save 1.7 billion tonnes of CO2 over 15 years and drive $85 billion of investment into developing economies. 

Step 1: Advocate for not changing definitions

Your first step is to oppose GHGP’s proposed changes to the definition and purpose of Market Based Method accounting (starts on page 6).  If you’re short on time, questions 18 through 22 can be your only area for comment. 

Today’s definitions of the location-based method (LBM) and MBM are clear and have underpinned clean energy markets for over a decade. The GHGP was thoughtful, intentional and elegant more than a decade ago when it distinguished between the GHG emissions associated with a company’s electricity use (in the LBM) and the emissions associated with a company’s energy procurement (in MBM). 

GHGP was right in creating those two lenses then, and it shouldn’t blur them together now. That’s because organizations are often shackled when trying to change the electricity their facilities consume, yet they have much more regulatory and market freedom to use their purchasing power to drive clean energy projects elsewhere — and often on dirtier grids.  

For a decade, large energy users have been able to aggregate their facilities’ energy use over large geographies on an annual timescale to provide large, credit-worthy contracts to clean energy project developers, resulting in 200 gigawatts of new clean energy capacity added to global grids. Likewise, even “unbundled Renewable Energy Certificate” procurement can induce and incentivize new clean energy projects to get built or existing projects to keep generating. The power of markets is a real thing.

The GHGP now proposes changing the MBM definition to “specify temporal correlation and deliverability requirements for matching the underlying electricity to the reporter’s consumption.” This proposed change that would require hourly and location matching of procurement-to-load would be a fundamental shift in the GHGP’s historic definitional separation between the LBM and MBM. 

There simply is no expert consensus that tighter alignment between the time and location of energy procurement to energy use is the most effective method for incentivizing real-world carbon-reducing decisions and rigorously measuring carbon impact of decisions. If anything, a tighter alignment is expected to decelerate clean energy transition. 

Step 2: Oppose mandatory hourly and locational matching

Proponents of the time and location matching proposal assert that better alignment of procurement to use would increase accuracy of accounting (it doesn’t — grid physics just don’t work that way) and would reduce inaccurate claims about “using” carbon-free power (it might do that, but there are better ways). 

The simplistic argument goes like this: “It’s obviously not credible for a company to use energy at night and buy solar power during the day and then say they’re using clean energy.” However, there’s an even simpler solution: don’t use the market-based method GHG accounting as a basis for clean-energy usage marketing claims. Let’s not fix a marketing claim problem with an accounting “solution.”

The atmosphere doesn’t  care if an energy consumer buys carbon-free power matched to their buildings’ location and time of electricity use — the atmosphere cares that energy consumers are using their buying power to accelerate deployment of carbon-free electricity. 

The detailed proposed changes to MBM are described in pages 19 through 46. It looks like a lot but it really boils down to this: choose a handful of questions in Section 5 and simply request and reiterate that GHGP should not make hourly and locational matching mandatory, and instead should make it optional.  

A simple verb change stating that hourly matching should follow an optional ‘may’ rather than a required ‘shall’ approach will send a strong message.

Simply put, GHGP got it right the first time. When it comes to deploying renewable and carbon-free energy projects, markets matter — and they matter a lot.