- – The Greenhouse Gas Protocol’s market-based rules have inspired greater accountability of emissions reductions in North America and Europe
- – However, under current guidelines there is insufficient provision for emerging markets, despite considerable energy consumption by international corporates in these areas
- – The D-REC (Distributed Renewable Energy Certificate) is a revolutionary tool for empowering emerging markets to facilitate emissions reductions
Zurich, 13th June 2023 — Since it first published its Corporate Standard in 2001, the Greenhouse Gas (GHG) Protocol has defined global best practice and provided a model for emissions management across many sectors. However, as it invites consultation for revisions to its Standard, D-REC – a not-for-profit initiative that delivers internationally recognised guarantees of origin for distributed renewable energy – believes that the next crucial step is to champion the framework in emerging markets.
The GHG Protocol has been a powerful force for building a culture of accountability in corporate emissions calculations, with a strong focus on the co-location of energy consumption and production in the business of energy certificate purchases and claims. This has empowered North American and European markets to take a more effective approach to reducing Scope 2 emissions.
Nonetheless, according to the International Finance Corporation, where traditional Power Purchase Agreements that add new renewables will displace 402 gCO2e/kWh on average in the United States, and just 255 gCO2e/kWh in Europe, Distributed Renewable Energy (DRE) projects in southern Africa displacing coal-fired grid energy or diesel generators deliver 3-6 times the impact. As such, D-REC advises that the GHG Protocol will achieve far greater climate impact by expanding its support for new renewable energy projects in emerging markets.
Corporate clean energy buying increases year on year, with the 36.7GW secured in 2022 being another record-breaking high. International corporations are increasingly looking for solutions to reduce their emissions in the areas where they consume energy for their direct operations or via their value chains. Yet, under current guidelines, it is not possible to account for energy attribute certificates (EAC) across markets boundaries or recognise the renewable energy engagement of supply chain partners. As a result, these areas miss out on critical investment that would empower their energy transition, remaining dependent on carbon-intensive energy generation for longer.
In practice, this leads to a scenario where, for example, a company based in Norway that wishes to reduce its emissions might opt to invest in domestic solar energy certificates rather than a solar project in Nigeria, even though the latter would be more efficient in generating renewable energy and would contribute materially to several UN Social Development Goals as a by-product.
“Reporting frameworks like the GHG Protocol can provide a solution for corporations targeting higher-impact clean energy purchases if it resolves to widen its parameters globally and tailor its legislation to the unique requirements of power systems in emerging markets,” says D-REC Co-lead Gian Autenrieth.
“There is better understanding today among private companies and public institutions that the location of their renewable energy engagement has a decisive say on the impact of their investment,” continues Autenrieth. “But their ambition to tap into these locations and substantiate their climate goals is restricted by the GHG Protocol’s criteria on energy market boundaries and Scope 3 eligibility of EAC’s.”
“D-REC is focused on opening up more pathways for private finance to reach distributed, off-grid, renewable energy projects in the emerging market. The GHG Protocol does not currently consider market-based instruments for Scope 3 accounting. If we do not revise this we are only compounding the current limitations of renewable energy certificates, making it more difficult for the private sector to meet their GHG emissions objectives, and depriving those most dependent on fossil fuels of the readily available investment that could drive the energy transition where it is needed most.”
About D-REC:
D-REC is a new type of energy attribute certificate that bridges corporate sustainable finance from multinationals to the distributed renewable energy sector in emerging markets. This catalyses new capital to provide access to affordable clean energy (SDG7).
D-REC is a market instrument that allows global businesses, who have committed to clean energy targets, to reduce their carbon emissions. By focussing on distributed renewable energy projects in communities with energy poverty, D-RECs go further than traditional renewable energy certificates, as they provide a direct link to positive social development, and clean energy additionality.
The D-REC Initiative is led by South Pole and Powertrust, with support from the Shell Foundation, Good Energies Foundation, Signify Foundation, GIZ-DeveloPPP, the UK’s Foreign, Commonwealth and Development Office (FCDO), International Finance Corporation (IFC), British International Investment (BII), USAID and the Swiss Agency for Development and Cooperation (SDC). D-REC will become a fully independent not-for-profit entity in 2023.
