Open Letter on Scope 2 GHG Reporting

February 27, 2015

At the Climate Action Reserve, we are strongly committed to developing effective, market-based approaches for reducing greenhouse gas emissions. We also believe that promoting the development of renewable energy is essential to any serious effort to mitigate climate change. Creating demand for renewables through voluntary markets for green power and “renewable energy certificates” (RECs) is one way to help advance both objectives. However, it is critically important that such markets be based on sound GHG accounting.

Recently, the World Resources Institute published a new guidance document regarding how companies should report their “Scope 2” greenhouse gas emissions. Scope 2 emissions are indirect emissions that arise from consumption of grid electricity, heat, or steam. The guidelines allow companies to use RECs to “reduce” their reported GHG emissions. If enough RECs are purchased, a reporting entity’s GHG emissions from electricity can be reported as zero, equivalent to not having consumed any electricity!

The parallel to carbon offsets is clear. By following the guidelines, companies can effectively claim to have “offset” their Scope 2 emissions using RECs or other contractual arrangements for green power. But is buying REC’s equivalent to buying offsets? Our longstanding answer is no.

It should be a bedrock principle of GHG accounting that no company be allowed to report a reduction in its GHG footprint for an action that results in no change in overall GHG emissions. Yet this is precisely what can happen under WRI’s new guidance.

It is because of this problem that we, along with other GHG accounting practitioners and academics, are calling on companies to not use the contractual/REC-based reporting method allowed by the guidance, and to rely instead on grid-based emission factors to determine Scope 2 emissions (which is also provided for in the guidance).

You can find out more by reading the open letter here. We would welcome your views and insights, and if you agree with us, you can also sign on to the letter.