New guidance helps companies curb emissions from the electricity they buy
Companies will be able to measure and report their emissions from purchased energy more accurately via new guidance released on 20 January by the World Resources Institute (WRI).
Emissions from purchased energy, or Scope 2 emissions, account for about 40% of global greenhouse pollution, even though many corporations have been investing more heavily in renewables. Investment in renewable energy expanded to $310bn in 2014, compared with $60bn a decade ago, according to Bloomberg New Energy Finance.
Companies buy half of all electricity consumed to fuel offices, distribution centres and data centres. WRI worked with more than 200 companies, including Apple, Walmart, Mars, Google and Facebook, plus utilities and government agencies in 23 countries to develop the guidance.
The GHG Protocol Scope 2 Guidance, as it is known, is the first major update of WRI’s Corporate Standard since 2004. Although more than 85% of businesses reporting to the Carbon Disclosure Project (CDP) had adopted that guidance, many have struggled to account accurately for emissions from purchased energy, particularly renewables, WRI says.
This is because the mechanisms that let corporate consumers choose a low carbon grid-delivered energy supply vary by electricity market. Some companies can work with their suppliers to buy low carbon energy or enter into power purchase agreements with individual generators. Consumers can also separately buy electricity attributes via certificates that convey information about energy production. In other words, in some cases they can pay for electricity that comes from a specific verifiable source of renewables.
However, companies have not had standards that address whether and how emissions from these diverse instruments should be accounted for in a GHG inventory. As a result, Scope 2 emission reports have varied significantly, leaving internal and external decision-makers unable to assess and compare corporate performance. The uncertainty around how energy purchases contribute to Scope 2 emission goals has hampered investment in and demand for low carbon energy, according to the WRI.
Mary Sotos, associate with WRI’s Greenhouse Gas Protocol team, says the new guidance will give a more consistent and transparent picture, making it easier both to compare companies and sectors in terms of these emissions, and also to understand global electricity markets.
“The problem for us has been that companies have been reporting and measuring electricity emissions in some very different ways. Now they are required to report according to both the common methods that are used: location-based and market-based.”
The location-based method looks at grid-average emissions data in the region where the company or facility is sited. While it shows the physical dynamics of the grid, it only enables a company to cut emissions by cutting consumption.
The market-based method, on the other hand, reflects emissions from electricity that companies have purposefully chosen and focuses around issues such as consumer choice and supplier disclosure. Companies can enter contracts with individual generators, which can give a good incentive to buy low carbon energy.
However, with the market-based analysis, it can be difficult to navigate which types of instruments are appropriate to reflect a company’s power inventory, Sotos says.
The Scope 2 Guidance sets quality criteria for the market-based method so that companies will know if information on their purchased electricity can be used.
In addition, it contains recommendations about what companies should disclose about their purchases, in terms of energy type and policy context, as well as total electricity, steam, heating, and cooling consumed, and what percentage of corporate operations have market-based method data available.
“This helps stakeholders understand some of the differences in electricity markets around the world,” Sotos says. It took about four years to update the guidance, with academics, NGOs, companies and others examining how emissions could be cut by individual groups and at sector-wide level.
While it might be hard at first for some companies to get more accurate data on their suppliers as opposed to data on consumption, in the longer term Scope 2 should help improve transparency and accountability, analysts say.
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