Renewable Energy Credits Allow Companies to Overstate Emissions Reductions

CLIMATEWIRE | Tradable credit for renewable power era are permitting firms to exaggerate their progress towards slashing emissions, in accordance to a brand new report from Concordia University and the University of Edinburgh Business School.

In the study, printed in Nature Climate Change, researchers examined the emissions of 115 firms with local weather objectives licensed by the Science Based Targets initiative (SBTi), a partnership that includes the World Resources Institute and different teams.

Researchers discovered that a lot of the reductions within the firms’ reported Scope 2 greenhouse fuel emissions — or emissions from bought power — have been from renewable power certificates (RECs) in the course of the 2015 to 2019 examine interval.

When RECs have been faraway from their accounting, most of the firms now not appeared on monitor to assist maintain international common warming beneath 1.5 levels Celsius above preindustrial ranges, in addition they discovered. That might have main implications for international efforts to battle local weather change, as firms are seen as essential gamers in lowering emissions.

The observe of incorporating REC use into emissions reporting “casts serious doubt on the veracity of reported corporate emission trajectories and their apparent alignment with the most ambitious Paris Agreement temperature goal,” the authors wrote.

Renewable power initiatives generate one REC per megawatt-hour of electrical energy that they contribute to the grid. Companies can then purchase the credit and use them of their emissions accounting.

Absent RECs, an organization would calculate its Scope 2 emissions utilizing its electrical energy consumption and grid emissions issue. But firms that buy RECs can use decrease common emissions components of their accounting, they usually can report decrease emissions whereas their actual electrical energy consumption stays the identical.

“As a company, you can report a progressive and rapid annual decline in emissions just by buying more certificates every year than the year before,” Anders Bjørn, a postdoctoral fellow at Concordia University’s Department of Geography, Planning and Environment and the lead creator of the examine, mentioned in an interview.

“But when these certificates are unlikely to actually put more renewables on the grid,” Bjørn added, “you’re sort of just taking credit for something that would have happened anyway.”

Proponents of RECs say that they can assist sign to the market rising demand for renewable power era. Lesley Hunter, senior vp of packages and content material technique on the American Council on Renewable Energy, mentioned that continued demand for RECs is “important to how the U.S. renewable energy market functions.”

RECs will also be acquired by energy buy agreements, beneath which the customer agrees to offtake a certain quantity of electrical energy and corresponding credit from a brand new renewable venture for a sure period of time.

In these instances, RECs “can have a direct impact on driving new renewable energy generation,” Hunter mentioned in an e mail.

The variety of firms with local weather objectives has exploded in recent times. In 2016, SBTi announced that 200 firms had dedicated to setting science-based targets. Today, more than 3,000 firms have set or are setting targets.

“With more and more companies setting these targets, it’s important to ensure it’s not just that targets are set, but also that companies then reduce their emissions accordingly,” Bjørn mentioned.

The reputation of RECs can be on the rise, in accordance to the examine, complicating reporting efforts: The pattern firms’ use of RECs represented 8 % of their bought power in 2015, however that jumped to 27 % in 2019.

The researchers discovered that the pattern firms decreased their mixed Scope 2 emissions by 31 % between 2015 and 2019, factoring in market-based devices resembling RECs. This fee of discount would put the businesses on monitor with the SBTi’s pathway to stopping international common warming from exceeding 1.5 levels Celsius.

Take RECs out of the equation, and emissions would have decreased by solely about 10 % throughout the identical interval, the researchers mentioned. At that fee, the drop in emissions would solely have the opportunity to meet SBTi’s much less bold trajectory for maintaining warming beneath 2 levels Celsius, which the group dropped last year to higher mirror Paris Agreement ambitions.

The researchers additionally used the businesses’ sample of REC utilization to venture emissions reporting into the longer term.

They discovered that almost all of the person firms that used market-based Scope 2 reporting wouldn’t align with the pathway to maintain warming beneath 2 levels Celsius. About 42 % of the mixed lower within the firms’ Scope 2 emissions can be unlikely to have an effect on actual greenhouse fuel emissions in that future state of affairs.

To make emissions accounting extra dependable and clear, firms ought to be required to primarily report their emissions with out factoring in market-based devices, the researchers instructed. Alternatively, they mentioned, stricter requirements could possibly be positioned on accounting, in order that firms might solely think about market-based devices that lead to extra renewable power improvement that may not in any other case happen.

An STBi spokesperson mentioned in an e mail that the group is “aware there is growing concern about companies using low-impact instruments to reduce their market-based scope 2 emissions, from an emissions accounting point-of-view, without driving real-world change.”

The group is taking steps to assist revise emissions reporting rules and to improve transparency round accounting, the spokesperson mentioned.

According to Bjørn, the lead creator of the examine, the findings are additionally a motive to be skeptical about how a lot firms might be relied upon to lead progress towards Paris Agreement objectives.

“It gets a bit dangerous if policymakers are looking at these actions taken by companies, and are sort of leaning back, saying, ‘They have it figured out,’” Bjørn mentioned. “There’s a danger of leaving the climate change issue to companies alone, and I think our study shows that you shouldn’t expect that companies are voluntarily going to solve climate change.”

Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2022. E&E News offers important information for power and setting professionals.

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