Green Electricity Purchasing Instruments – Are We Heading for Carbon-Gate?

Green electricity purchasing instruments or tariffs generally involve the sale of environmental attributes associated with electricity generation, such as the attribute of coming from a renewable source. Consumers may buy such instruments because they want to increase the amount of renewable electricity generated, or, if they are measuring and reporting their greenhouse gas emissions, they may also want to report the emissions associated with their electricity consumption as zero.

However, some purchasing instruments may not deliver additional renewables, and counting emissions as zero can undermine the usefulness and credibility of greenhouse gas accounting. The potential problems with green electricity purchasing instruments include:

1. Purchasing such instruments may not necessarily increase the amount of renewable electricity produced (particularly where the amount of renewables is driven by government regulations);
2. Counting green instruments that do not increase the amount of renewables as having zero emissions can undermine the accuracy and relevance of greenhouse gas accounts; and
3. The low-carbon attributes associated with green electricity instruments may be double-counted in grid average emission factors.

There is sometimes a hint of creative accounting with green electricity instruments, e.g. making emissions seemingly disappear without reducing actual emissions. And there is also the spectre of reputational risk for reporting companies that play too loose with their greenhouse gas accounting practices.

The issue of how to account for green electricity purchasing instruments in greenhouse gas accounting is highly topical at the moment as the Carbon Disclosure Project (CDP) is expected to change its guidance to allow double-counted, non-additional green electricity to be reported as having zero emissions (for 2013 CDP submissions). The Greenhouse Gas Protocol is also currently developing guidance on green power accounting, and the outcome is likely to be adopted by most other reporting initiatives.

In addition to the reputational risk to individual reporting companies, it is vitally important for the long-term credibility of greenhouse gas accounting, as a discipline, that its rules and practices are robust. This paper sets out the main problems with green electricity purchasing instruments, and also suggests some robust solutions.