Many companies purchase renewable energy certificates to report reduced emissions, but this may not lead to actual emission reductions. We need emission accounting that is both accurate and that incentivizes companies to make impactful contributions to decarbonizing electricity grids.
Messages for Policy
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Renewable energy certificates allow companies to report emission reductions, although certificates may not cause an increase in renewable energy generation or reduce emissions.
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Proponents of renewable energy certificates should offer evidence to support the claim that certificates lead to more renewable energy generation under certain conditions.
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To drive actual emission reductions, policymakers and accounting standard developers should limit the use of ineffective renewable energy certificates.
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Impact investors should prioritize real emission reductions by screening for the use of ineffective renewable energy certificates.
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Companies that want to be seen as climate leaders should avoid the use of ineffective renewable energy certificates, to minimize the risk of perceived greenwashing.
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References
Further Reading
Kuramochi, T. et al. Beyond national climate action: the impact of region, city, and business commitments on global greenhouse gas emissions. Clim. Policy 20, 275–291 (2020). Estimates the potential effect of the climate commitments of non-state actors on global emissions in 2030.
Bjørn, A., Tilsted, J. P., Addas, A. & Lloyd, S. M. Can science-based targets make the private sector Paris-aligned? A review of the emerging evidence. Curr. Clim. Change Rep. https://doi.org/10.1007/s40641-022-00182-w (2022). Reviews the literature on science-based targets with a focus on potentials for aligning the private sector with the Paris goal.
GHG Protocol Scope 2 Guidance: An Amendment to the GHG Protocol Corporate Standard (World Resources Institute, 2015); https://go.nature.com/39KY4J7Presents the most widely used emission accounting standard and discusses the potential impacts of renewable energy certificates on grid decarbonization.
Brander, M., Gillenwater, M. & Ascui, F. Creative accounting: a critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions. Energy Policy 112, 29–33 (2018). Presents a critique of the above emission accounting standard focusing on the role of renewable energy certificates.
Corporate Climate Responsibility Monitor 2022: Assessing the Transparency and Integrity of Companies’ Emission Reduction and Net-Zero Targets (NewClimate Institute, 2022); https://go.nature.com/3MHZRNKPresents an in-depth critical review of the climate change disclosures of 25 major companies, including corporate strategies for renewable energy sourcing.
Acknowledgements
This research was funded by the Natural Sciences and Engineering Research Council of Canada (NSERC) Discovery Grants Program (grant number RGPIN/6956-2017 (S.M.L.) and RGPIN-2017-04159 (H.D.M.)), Concordia University Research Chair funding (H.D.M.) and the Concordia University Horizon Fellows Program (A.B.).
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Bjørn, A., Lloyd, S.M., Brander, M. et al. Renewable energy certificates allow companies to overstate their emission reductions. Nat. Clim. Chang. 12, 508–509 (2022). https://doi.org/10.1038/s41558-022-01385-7
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DOI: https://doi.org/10.1038/s41558-022-01385-7
