Have you fallen for the green power accounting shell game?

January 26, 2015, by Michael Gillenwater

If you are reading this blog, then you probably spend part of your time working on the issue of climate change. Don’t you sometimes just get tired? Tired of the constant burden of pushing on a topic too few people seem to care enough about?

For me, this burden, in part, takes the form of correcting the faulty logic that pervades green power purchasing claims in corporate GHG reporting. What wrong did I perform in some past life to be given this Sisyphean task.[1]

As I have discussed previously in this blog and our first podcast, corporate (and household) claims that they are buying green power and reducing their carbon footprint are, in all but special cases[2], greenwashing. The evidence is conclusive.[3]

And so it was with delight I recently read this Bloomberg Businessweek article—“No More Faking It: Companies Ditch Green Credits, Clean Up Instead.” I encourage you to read it. Not only was someone in the media paying attention, but some companies are finally realizing their past errors and thinking more deeply about environmental integrity for their GHG emission inventories and sustainability reports.

Around the same time, a boutique sustainability consulting firm released a report independently arguing that, “Most U.S. companies believe their renewable energy purchase is providing real-world benefits, but the vast majority are only getting marketing benefits.”

The boulder was suddenly feeling smaller.

But, the relief was short lived. Last week the GHG Protocol program released new guidance on the accounting for Scope 2 GHG emissions (i.e., indirect emissions from purchased electricity, heat, steam, and cooling). And with it, the size of the boulder we need to push up the hill doubled in size. This guidance effectively endorses zero emission claims made by corporations based on their payments for Renewable Energy Certificates (RECs). We know that these claims allow the sale of marketing rights, yet add no new renewable capacity to the grid and lack environmental integrity. The problem is that this fact is understood by too few people.  Further, the flaw is advanced not only by those promoting REC sales but also by organizations like CDP, The Climate Registry, and now WRI.   And as we outlined in detail on our open letter[4], RECs represent a bad practice in environmental accounting. It is an unintentional shell game that allows companies to claim reduced emissions while actual emissions to the atmosphere remain unchanged.[5]

The broader question represented is: what’s the use of corporate environmental reporting if the accounting rules help companies greenwash their upstream and downstream environmental impacts with the purchase of meaningless “environmental attributes?

If we want corporate reporting to be credible, we need to be using evidence-based environmental accounting rules. Otherwise we’re all just spinning our wheels. If companies are starting to think more deeply about environmental integrity, shouldn’t our guidance do that too?

As my colleague, Don Bain, explains here, corporations should be concerned about the reputation risks they are embracing by making baseless green power claims in their GHG inventory.

 


[1] Truthfully, I am far from alone. Many colleagues have long been part of a fellowship on this issue and are listed here.

[2] A company installs onsite solar or other renewables, then it is purchasing less electricity, and clearly altering its Scope 2 emissions. The “special cases” referred to here can potentially take the form of a long-term Purchase Power Agreement (PPA) or other form of direct investment in a renewable energy project. The key characteristic for these “cases” to have environmental integrity is that it can be shown with some confidence that additional renewable energy capacity is created. This accounting is properly done on a project-level basis. The new GHG Protocol Scope 2 incorrectly assumes that this accounting can be done on an entity-level basis.

[3] See research papers here and here. If you want a copy of these papers, post a comment below and we will send them to you.

[4] If you would like to add your name, and thereby endorse, this letter, please email your full name, title, affiliation, and email address to: Scope2openletter@gmail.com.

[5] And as we showed here, no realistic amount of growth in the voluntary REC market in the future is likely to change this fact.


4 responses to “Have you fallen for the green power accounting shell game?”

  1. Neil Salisbury says:

    Well put Michael, I couldn’t agree more. While a number of organisations are moving aware from purchasing green power, the adoption of and support for green power purchases by CDP and WRI does not really help the cause.

  2. Paul Reed says:

    Thanks for the illuminating blog post on scope 2 reporting and RECs Michael. Can you please send me copies of the two research papers cited (3). Paul

  3. Pedro Martins Barata says:

    Can we not do anything about this? Surely WRI should work to correct this mistake?

  4. Christopher says:

    Very insightful piece on GHG accounting. Thank you. Please send me the 2 research papers. Chris

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