14 June 2022

After the Paris Climate Agreement of 2015, adopted during COP 21, there has been an increased focus placed upon the private sector to meet various global climate goals.
Renewable energy certificates threaten the integrity of corporate science-based targets

Notably, businesses have been encouraged to reduce their reported emissions by setting clear science-based targets (SBTs). SBTs align voluntary company level emission reduction targets with the global temperature goal of the Paris Agreement.

To reach these targets, many companies have opted to buy renewable energy certificates (RECs) to claim that they use renewably generated electricity. However, recent research has suggested that buying RECs is unlikely to lead to additional renewable energy production.

Research by Concordia University, in collaboration with the University of Edinburgh Business School, has shown that the widespread use of RECs by companies with SBTs has led to an inflated estimate of the effectiveness of mitigation efforts. Analysis based on the emissions reporting of 115 companies showed that recent emission trajectories (from 2015—19 data) did not align with the 1.5°C Paris Agreement goal, despite appearing to do so.

Companies reported a 31% reduction in emissions related to purchased energy, but two-thirds of that reduction is based on RECs, and so is unlikely to be a real reduction in emissions.

"Before developing this study, I knew there was an issue with companies overstating their electricity related emission reductions, but I was surprised to learn just how big of an issue it is. Our findings suggest that there is a need to revise accounting guidelines such that they require companies to report only real emission reductions as progress towards meeting their SBTs," said Dr Matthew Brander, Senior Lecturer in Carbon Accounting.

"We propose that the GHG Protocol and the Science-based Targets Initiative should revise how greenhouse gas accounting rules are applied," said Dr Brander. "This could be achieved by either removing the use of RECs or by introducing an additionality test so that only arrangements that drive new renewable generation can be used."

To read more about this research, visit Nature Climate Change.

Matthew Brander Headshot

Matthew Brander

Senior Lecturer in Carbon Accounting