2.4.1 Treatment of renewable electricity in Scope 2 emissions

This guidance details how the carbon attributes of renewable energy in the form of energy attribute certificates (EACs) are accounted for in Scope 2 of the GHG inventories that underpin CarbonNeutral® certifications.

A number of countries have adopted policies requiring or encouraging electricity suppliers to offer renewable electricity to consumers. This may be done through a range of different electricity products such as tariff- based programmes and power purchase agreements. All credible renewable electricity products involve the cancellation of EACs such as Renewable Energy Certificates (RECs), International Renewable Energy Certificates (I-RECs) or Guarantees of Origin (GOs) in order to support the renewable electricity claim.

Prior to 2015, detailed guidance on how to report the carbon attributes of renewable electricity was absent from the GHG inventory standards accepted under The CarbonNeutral Protocol. However, in 2015, the WRI, author of the widely used GHG Protocol Corporate Standard, published its “Scope 2 Guidance” as an amendment to the GHG Protocol to clarify the accounting treatment of low-carbon grid-delivered energy in Scope 2 GHG inventories. The amendment, published after four years of development and industry consultation, provides guidance for how corporations should measure emissions from electricity and energy purchases, including renewable energy, and covers:

• Requirements: Accounting and reporting requirements which entities must meet to be in conformance with the GHG Protocol Corporate Standard
• Quality Criteria: A list of Scope 2 quality criteria that all electricity purchasing instruments, termed “contractual instruments,” need to meet in order to be used in market-based method accounting
• Recommendations: Additional features entities are recommended to disclose include their electricity purchases, as well as other metrics such as total electricity, steam, heating, and cooling consumed and what percentage of a corporates’ operations have market-based method data available

From the date of publication of the GHG Protocol Scope 2 amendment, entities using the GHG Corporate Protocol to meet the GHG inventory requirements of The CarbonNeutral Protocol are required to meet its Scope 2 Guidance, as officially amended from time to time by the WRI.

Entities using any other GHG inventory standard recognised under The CarbonNeutral Protocol are subject to The CarbonNeutral Protocol’s original requirements that:

1. Zero emissions may only be claimed when double-counting is avoided. Evidence should be available to establish either that the renewable electricity is not supplied to the national grid in the country concerned; or, that the benefit of the renewable energy is not included within national average grid factors or any other reporting factors
2. Emissions from energy supplied as “green”, “clean,” or “low-carbon” can be treated as zero where the energy consumed has been fully offset by the supplier or a third party using carbon credits that meet the requirements of The CarbonNeutral Protocol

For more information see: RECS International, 2020, Maximising the reliability and impact of buying renewables: guidance for market participants, link

Table 10: Illustrative Market-Based Scope 2 Reporting Declaration in Support of CarbonNeutral® Certification

2.4.2. Treatment of Energy Attribute Certificates (EACs) in Scope 3 emissions

This guidance details how EACs may be applied to emissions resulting from:

• Electricity consumption in the use phase of CarbonNeutral® product and product-as-a-service certifications
• Electricity consumption from employee homeworking and remote work
• Transmission & Distribution (T&D) losses

This guidance – first published in January 2022 – is the result of market guidance and is expected to be reviewed and updated once new guidance becomes available from the GHG Protocol and/or other recognised standards.

Use phase of CarbonNeutral products and products-as-a-service

The following requirements must be met when EACs are applied to use-phase emissions:

• The emissions to which EACs are applied as part of CarbonNeutral product or product-as-a-service certifications must be those from electricity consumption in the use phase
• Use-phase emissions must be reduced to zero for the entirety of the product lifespan through the application of EACs and/or carbon credits to ensure a valid CarbonNeutral claim
  • The GHG Protocol Scope 2 Guidance recommends matching the consumption period of electricity to the generation period. Therefore, vintage of EACs must match the period of electricity consumption as closely as possible. If EACs cannot be applied for the entirety of the product lifespan, entities must ensure that emissions from the entire use phase are reduced to zero, either via EACs and/or carbon credits
  • For example, in the case of a product whose lifespan is seven years, if EACs are procured for years 1 and 2 but are unavailable for years 3-7, then carbon credits equivalent to the estimated electricity emissions for years 3-7 must be held in inventory until EACs are purchased and retired. At the end of the certification period, upon reconciliation of the actual product use, a sufficient quantity of EACs and/or carbon credits must be retired.
• CarbonNeutral products and products-as-a-service must calculate emissions for a defined function, as well as the duration and level of the service provided by the product, referred to as the use phase, as defined in the GHG Protocol Product Life Cycle Accounting and Reporting Standard
• EACs must be retired/cancelled as appropriate for a specific market. The retirement shall be made on behalf of end users of the product or product-as-a-service where practical and possible
• Methodologies and assumptions for determining electricity consumption for the use phase must be provided as described in Technical Specification 2.2
• Use-phase emissions must be reported using both a location-based and market-based method (i.e., with and without the application of EACs)

Use-phase emissions shall be determined according to the following requirements:

• Primary data must be used where available
• Use data must be attributable to the country/region where the electricity is being consumed by the product or product-as-a-service. Where actual location is not available, a reasonable estimate of the country or region must be made
• Disclosure in the product or product-as-a-service terms and conditions must be made referencing the retirement of EACs on end users’ behalf

Employee homeworking

The following requirement must be met when EACs are applied to electricity consumption from employee homeworking and remote work:

• The location of electricity consumption must match the location of the EAC, e.g., US employees must utilise North America RECs

2.4.3 Market-based Scope 2 reporting declaration to support CarbonNeutral® certification

This guidance details the disclosure requirements for businesses seeking to make a market-based Scope 2 reporting declaration in support of CarbonNeutral® certification. The disclosure only needs to be made when the party supplying the contractual instrument is not the primary CarbonNeutral certifier. For example, when an entity sources renewable electricity directly from an electric utility to support a Scope 2 reporting claim, it should provide details of the contractual instrument within the disclosure table (Table 10 above). The disclosure table will be provided by the certifier upon request.

A column should be added to the table to account for each contractual instrument claim made within a corporate GHG inventory. Often this will involve engaging the contractual instrument supplier to determine the appropriate form of evidence that can be supplied to substantiate a market-based claim. The disclosure table should be completed at the time of preparing the GHG inventory and should be signed by a company representative to warrant that the information provided is up to date, accurate and that the CarbonNeutral certifier can rely on the information.

When an entity’s location is neither consuming renewable energy nor applying EACs to reduce their Scope 2 emissions, and a published residual mix emissions factor is available, then the residual emissions factor(s) must be applied, resulting in a market-based total for Scope 2 emissions.

2.4.4 Energy Attribute Certificate (EAC) Application Protocol for third-party assessment partners

To ensure Assessment Partners and Providers are fully informed regarding EAC purchases, and so they can be accurately integrated into assessment reports, entities should follow the agreed upon EAC Application Protocol. The EAC Application Protocol is a document for use by Assessment Partners and Providers to clarify the process and division of responsibilities to ensure accurate integration of EACs into GHG emissions assessments. For example, the document helps deal with the application of EACs to multiple sites, and EAC deficits and surpluses. Please contact your Client Engagement Manager for further details.

2.4.5 How to report GHG emissions from green gas certificates

Green gas certificates are relatively new products that are being adopted by businesses to manage their Scope 1 GHG emissions.

Green gas, known also as biogas, refers to calorific gas produced by the breakdown of organic matter, through anaerobic digestion or fermentation. Feedstocks include biodegradable materials such as manure, sewage, municipal water, green waste and plant material.

Before biogas can be introduced to the gas grid it needs to be upgraded to pipeline quality natural gas standards. This upgraded gas becomes biomethane, which can be used for any purpose currently satisfied by conventional natural gas.

Injecting biomethane into the natural gas grid displaces the need for a unit of conventional natural gas. Therefore, certificates and contracts are the only practical means of tracking the green gas from production to end use. Projects such as the Green Gas Certification Scheme aim to provide a certified means of tracking green gas injected into the grid through to end user consumption claims, similar to renewable electricity tracking schemes such as I-REC (International REC standard) and EECS-GO (European Energy Certificate System – Guarantee of Origin).

Clear guidance on extending market-based reporting approaches to renewable gas is still forthcoming. In their Technical Note: Accounting of Scope 2 emissions, the CDP recommends referring to the GHG Protocol’s Scope 2 Guidance when using green gas certificates. Appendix A of the Scope 2 Guidance states:

Companies may have contracts to receive heat or steam from providers that specify the fuel source and emission rate associated with their received energy. In addition, “green heat” certificates generated from biogenic fuel sources may be issued and traded independently from the energy flows and injection into the distribution grid. Companies shall report emissions from the purchase and use of these energy products the same as for electricity: according to a location-based and market-based method, if the contractual instruments used meet the Scope 2 Quality Criteria as appropriate for gas transactions.

Section 6.12 of the Scope 2 Guidance goes on to say:

While biomass can produce fewer GHG emissions than fossil fuels and may be grown and used on a shorter time horizon, it still produces GHG emissions and should not be treated with a “zero” emission factor. Based on the Corporate Standard, any CH₄ (methane) or N₂O (nitrous oxide) emissions from biogenic energy sources use shall be reported in Scope 2, while the CO₂ portion of the biofuel combustion shall be reported outside the scopes. In practice, this means that any market-based method data that includes biofuels should report the CO₂ portion of the biofuel combustion separately from the scopes.

Applying this to the use of biomethane delivered through the gas pipeline, we anticipate the following impacts on a company’s GHG report:

• Scope 1 CO₂ emissions can be reported as zero for biomethane consumption, i.e., for each thermal unit matched to a green gas certificate. This biogenic CO₂ represents the carbon sequestered during the growth of the biomass.
• Biogenic CO₂ emissions must be reported outside of Scopes 1, 2 or 3, as an addendum to the company’s GHG inventory.
• To fully account for a site’s GHG impact, fugitive CH₄ and N₂O emissions from biomethane combustion must be reported under Scope 2. Unlike CO₂, these fugitive emissions are not captured during the growth of the biomass and therefore need to be reported as a Scope 2 emission.
  

Table 12b illustrates how this would apply to a site in London, using the UK relevant factors published by BEIS (UK Government Department for Business, Energy and Industrial Strategy. Greenhouse Gas Reporting: Conversion Factors 2018, link). For biomethane, these factors combine the CH₄ and N₂O emissions into a single factor, which is marginally higher than the fugitive CH₄ and N₂O emissions associated with natural gas combustion.

Additional guidance from the 2020 CDP Technical Note on the use of green gas certificates includes:

• Green gas certificates should be legitimate and legally enforceable means of transacting property rights and claims to biogenic or renewable fuel attributes of gas production in a specific market.
• Use of gas certificates should be limited to users on the same pipeline network who can physically receive gas from gas plants on that network.

Table 12a: Reporting 10,000 MWh of Natural Gas Consumption

Table 12b: Reporting 10,000 MWh of Biomethane Consumption Evidenced by Green Gas Certificates