When reporting indirect energy-related GHG emissions (Scope 2), one can use a market-based approach.
Following this approach, emissions will depend on the quantity of renewable electricity purchased by the reporting organization.
Definitions
According to the GHG Protocol, market-based GHG emissions are based on GHG emissions emitted by the generators from which the reporter contractually purchases electricity bundles.
To understand differences between location-based and market-based, please refer to this article:
RECs = "Renewable Energy Contracts"
A REC is a tradeable, market-based instrument that represents the legal property rights to the “renewable-ness”—or non-power (i.e., environmental) attributes—of renewable electricity generation. A REC is created for every megawatt hour (MWh) of electricity generated and delivered to the grid from a renewable energy resource. Electricity cannot be considered renewable without a REC to substantiate its renewable-ness.
GOs = "Guarantees of Origin"
The Guarantee of Origin (GO or GoO) is the tracking certificate regulated in the European Directive 2009/28/EC, article 15. The GO is further standardized via the European Energy Certificate System (EECS) provided by the Association of Issuing Bodies (AIB). The EECS makes trade, cancelation and use of GOs standardized across Europe.
The GO has no inherent price except for the price given to it by the supply and demand market. The GO is the carrier of electricity attributes.
PPAs = "Purchased Power Agreements"
A PPA is a contract between the purchaser and supplier of energy or electricity. The PPA contract lays out how much electricity the supplier has promised to place on the grid and how much the consumer will take off. A PPA most often guarantees an electricity price beyond just guaranteeing the supply. A PPA however can never deliver electricity attributes that are different from the grid-average unless a tracking certificate (like GOs) are transferred in combination with the electricity, otherwise there will be a risk of double counting (a same MWh is counted twice).
What is the difference between RECs and carbon offsets ?
Offsets and RECs serve distinct purposes and cannot be used interchangeably. They are like different tools in a sustainability toolkit, each with a specific role.
While both help reduce emissions, they are different:
Carbon offsets are employed to tackle both direct and indirect greenhouse gas (GHG) emissions by confirming reductions in global emissions through external projects (ex: Reforesting a Lost Tropical Rainforest in Panama). These verified emissions reductions are deducted from an organization's emissions to ascertain the net organizational emissions.
On the other hand, Renewable Energy Certificates (RECs) are utilized to address the indirect GHG emissions linked to the purchase of electricity, specifically scope 2 emissions. They verify the utilization of electricity from zero- or low-emissions renewable sources (like solar, wind, geothermal, biomass, and hydropower). RECs are quantified in megawatt-hours (MWh) of renewable energy and play a role in calculating gross market-based scope 2 emissions, which depend on the emissions factor associated with the renewable energy generation indicated by the REC.
If one wants green electricity to power 100% of their home or business, they should buy an amount of RECs that matches the total electricity they consume.
Example: if a consumer uses 10 MWh per year, they should purchase 10 RECs to ensure all the electricity they use comes from renewable sources.
Here is a list of the major differences between RECs and offsets:
| RECs | Offsets |
Unit | 1 MWh of renewable electricity | 1 metric ton of CO2e |
Purpose | Convey environmental attributes and renewable electricity use claims | Emissions reductions |
Source | Renewable electricity sources (solar, wind geothermal, biomass, hydropower) | External projects that avoid or reduce GHG emissions |
GHG reporting | Can lower an organization’s gross market-based scope 2 emissions from purchased electricity | Reduce or “offset” an organization’s scope 1, 2 or 3 emissions |
Consumer Environmental Claims | Can claim to use renewable electricity from a low or zero emissions source | Can claim to have reduced or avoided GHG emissions outside the organization’s operations |
Additional tests | Not required ➡️ Project additionnality is not required for a renewable energy usage claim or to report use of zero-emissions power However, Greenly asks for proof to validate the % of RECs you enter on the platform | Required |
⚠️ RECs buy up the production of renewable energy, but do not offer any guarantee that carbon emissions are avoided. Thus, it's crucial to avoid confusing terminology like using "offsets" for REC purchases.
You can also read Greenly's article about carbon offsets
For more information, you can also read this article publish by EPA.
How Greenly computes market-based electricity-related emissions?
Greenly usually computes market-based GHG emissions in three steps:
Step 1: Verifying the documents provided by the organization (RECs, GOs, etc), to ensure the organization's claims are valid.
Step 2: Organizations enter the % of RECs for each of their building.
This is done via the "Building module" on Greenly's platform.
In this module, organizations have the possibility to fill all useful information about their buildings, including information about electricity consumption. Thus, along with the electricity consumption, organizations can enter the % of RECs.
Step 3: Take the % of RECs into account in the GHG emissions computation.
Once the % of RECs is filled for all buildings, Greenly's platform automatically calculates the GHG emissions for each building based on:
the electricity consumption
the electricity grid (to choose the appropriate emission factor)
the % of RECS
Final market-based building emissions are calculated as follows:
Emissions (kgCO2e) = Consumption (kWh) x (1 - %RECs) x Emission factor (kgCO2e/kWh)
Thus, the higher the % of renewable electricity, the lower the market-based emissions.
One should notice that by doing this calculation, we consider that the % of electricity "coming" from purchased RECs has no related emissions because in GHG Protocol methodology, renewable electricity has no impact (zero emissions for scope 2 since it's renewable, and zero for scope 3 since power supply infrastructure amortization is not taken into account in GHG Protocol).