Abstract
Electricity generation accounts for approximately 25% of global greenhouse gas (GHG) emissions, with more than two-thirds of this electricity consumed by commercial or industrial users. To reduce electricity consumption-related emissions effectively at the level of individual firms, it is essential that they are measured accurately and that decision-relevant information is provided to managers, consumers, regulators and investors. However, an emergent GHG accounting method for corporate electricity consumption (the ‘market-based’ method) fails to meet these criteria and therefore is likely to lead to a misallocation of climate change mitigation efforts. We identify two interrelated problems with the market-based method: 1. purchasing contractual emission factors is very unlikely to increase the amount of renewable electricity generation; and 2. the method fails to provide accurate or relevant information in GHG reports. We also identify reasons why the method has nonetheless been accepted by many stakeholders, and provide recommendations for the revision of international standards for GHG accounting. The case is important given the magnitude of emissions attributable to commercial/industrial electricity consumption, and it also provides broader lessons for other forms of GHG accounting.
Highlights
Electricity generation currently produces around 25% of global greenhouse gas (GHG) emissions (Victor et al, 2014), or about 12.4 GtCO2e/year
We conclude with recommendations for a more robust accounting method, and briefly reflect on the applicability of the lessons learned for GHG accounting more broadly
One feature of purchased electricity from a public distribution grid, which makes it difficult from an accounting perspective, is that it is not possible to trace the electricity consumed by an entity back to any particular grid-connected power plant (Raadal, 2013). To address this physical reality, it has been standard practice to use a grid average emission factor to estimate scope 2 emissions (e.g. those provided by Defra/DECC (2016) or eGRID (2017)), which is derived by dividing the total emissions from all the generation sources supplying a defined transmission and distribution grid area by the total amount of electricity supplied over a given period (Harmsen and Graus, 2013)
Summary
Electricity generation currently produces around 25% of global greenhouse gas (GHG) emissions (Victor et al, 2014), or about 12.4 GtCO2e/year. An emergent ‘market-based’ method for quantifying emissions associated with electricity consumption, which allows reporting entities to purchase and claim the GHG attributes associated with renewable generation, is not aligned with reducing emissions or providing accurate or relevant GHG information. This issue is highly topical as recently published reporting guidance from the GHG Protocol (WRI, 2015) has endorsed the marketbased approach, while the forthcoming update of ISO 14064-1 for corporate GHG inventories provides an opportunity to establish a more robust approach. We conclude with recommendations for a more robust accounting method, and briefly reflect on the applicability of the lessons learned for GHG accounting more broadly
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