What carbon accounting methods can promote the actual decarbonization of electricity?

Many electricity purchase agreement systems have been developed around the world in recent years so that companies can “choose” the type of electricity they purchase through Energy Attribute Certificates.

The accounting methods for these certificates developed by the GHG Protocol are crucial for assessing the actual contribution of these purchases to companies’ carbon footprints and for accurately incorporating them into climate strategies.  This was recently highlighted by the Financial Times^[1] as illustrated by the controversial example of the GAFAM companies, all of which have declared “carbon neutrality” and are both the largest consumers of these certificates and major funders of the GHG Protocol. In particular, the article highlights the contrast between Google—which favors stricter regulations and the establishment of criteria ensuring spatiotemporal consistency between electricity production and consumption— and Amazon and Meta, which advocate for the liberalization of various regional electricity markets under the pretext of a “more cost-effective and faster decarbonization of the grid.”

An Energy Attribute Certificate (EAC) is a contractual instrument designed to provide information (attributes) about a unit of energy—including the resource used to generate the energy—to track the MWh produced, and to transfer ownership of the generated electricity on electricity markets. These certificates have been adopted in many countries under various names, such as Renewable Energy Certificates (RECs) in the United States or Guarantees of Origin (GO) in Europe, providing consumers with a guarantee that their electricity is generated from renewable energy sources.

Since electricity grids are interconnected at the regional or national level, these power purchase agreements rarely reflect a physical connection between the generator and the consumer. However, the GHG Protocol’s market-based accounting method allows organizations to use the emission factors for renewable electricity purchased in the form of certificates and to claim emission reductions in their carbon footprint. Under the current European system, a German organization that consumes electricity on a winter night can purchase Guarantees of Origin derived from solar power generated on a summer day that same year in Spain. Claims regarding the associated emissions reductions not only mislead consumers about the electricity they are using but are also likely to slow down the decarbonization of Germany’s electricity mix.

Rental-based accounting, which is based on the network’s average annual emission factor, has also been criticized because it does not recognize the actions taken by thecompanies who invest in renewable energy production through these certificates, and does not distinguish between electricity usage, whether it is off-peak or peak hours, or summer or winter. Above all, the overlap between these two types of accounting creates a high risk of double-counting, as companies are likely to favor the accounting method that suits them best. The same MWh of carbon-free electricity from Spain could then potentially be accounted for as “rental-based” by a Spanish entity and as “market-based” by a German organization.

These accounting methods established in the 1990s, which are crucial for companies’ claims and for the decarbonization of the electricity sector, are therefore now being seriously called into question. In addition, the GHG Protocol has set out to update its methodologies by 2026, and influential stakeholders have differing views on the changes that should be made, as the Financial Times reports.

Committed to promoting rigorous and ambitious climate accounting methods, Carbone 4 and the Net Zero Initiative have begun drafting a guide on the subject, which aims to answer the following questions :

• Under what conditions does a renewable electricity purchase agreement actually enable an organization to decarbonize the electricity it relies on?
• Does the current carbon accounting system reflect this?
• And how could it evolve to achieve that?

An introductory webinar to present the guide is scheduled for Thursday, September 26, at 4:00 p.m. in English at next link.