The GHG Protocol Scope 2 Guidance: Transforming Carbon Inventories

Approximately 38 percent of India’s greenhouse gas emissions come from energy generation and about 76 percent of that energy is consumed by industrial and commercial users . According to the Center for Monitoring Indian Economy (CMIE), improved availability of coal and gas will likely lead to a 6.2 percent rise in electricity generation in 2014-15 while thermal power generation will grow by 6 percent. If two fifth of India’s emissions come from the energy that keeps the businesses running, how does business report those emissions?

Development Of The Scope 2 Guidance

The new Scope 2 Guidance represents a four-year global collaboration to harmonize methods for how companies report greenhouse gas (GHG) emissions from purchased electricity, steam, heat, and cooling. Companies following the GHG Protocol Corporate Standard, report purchased electricity, steam, heat and cooling as scope 2 emissions and have identified multiple possible methods in the 11 years since its publication. Wider consumer choice in electricity suppliers and products has made it more complicated, with inconsistent and incomparable data that slows progress in consumer-driven demand for low-carbon electricity.

The World Resources Institute (WRI), in partnership with the World Business Council for Sustainable Development (WBCSD) and a global, multi-stakeholder task force, is launching new clarifying Scope 2 Guidance. This guidance amends and adds to the original requirements of the Corporate Standard, the most widely used tool for accounting and reporting corporate emissions in the last decade.

Strengthening Corporate Action

The rapid adoption of renewable energy and other changes in the energy market have left corporations uncertain about how to report their scope 2 emissions and how to measure emissions from their renewable energy purchases. The new Scope 2 Guidance fixes that problem by giving corporations a common framework to account for their energy emissions whether from electricity contracts or instruments like renewable energy certificates. This transparency and certainty in how emissions from energy purchases are accounted for will facilitate and promote more effective incentives for companies and markets to demand and scale up the use of renewable energy.

Scope 2 Quality Criteria

There are eight Scope 2 Quality Criteria that all contractual instruments must meet in order to be a reliable data source for a GHG inventory. (Adapted from the Guidance)

All contractual instruments used in the market-based method for scope 2 accounting shall:

Convey the direct GHG emission rate attribute associated with the unit of electricity produced.

• Convey the direct GHG emission rate attribute associated with the unit of electricity produced.
• Be the only instruments that carry the GHG emission rate attribute claim associated with that quantity of electricity generation.
• Be tracked and redeemed, retired, or canceled by or on behalf of the reporting entity.
• Be issued and redeemed as close as possible to the period of energy consumption to which the instrument is applied.
• Be sourced from the same market in which the reporting entity’s electricity-consuming operations are located and to which the instrument is applied.

In addition, utility-specific emission factors shall:

• Be calculated based on delivered electricity, incorporating certificates sourced and retired on behalf of its customers. Electricity from renewable facilities for which the attributes have been sold off (via contracts or certificates) shall be characterized as having the GHG attributes of the residual mix in the utility or supplier-specific emission factor.

In addition, companies purchasing electricity directly from generators or consuming on-site generation shall:

• Ensure all contractual instruments conveying emissions claims be transferred to the reporting entity only. No other instruments that convey this claim to another end user shall be issued for the contracted electricity. The electricity from the facility shall not carry the GHG emission rate claim for use by a utility, for example, for the purpose of delivery and use claims.
• Finally, to use any contractual instrument in the market-based method requires that:
• An adjusted, residual mix characterizing the GHG intensity of unclaimed or publicly shared electricity shall be made available for consumer scope 2 calculations, or its absence shall be disclosed by the reporting entity.

The new Guidance helps corporations navigate scope 2 emissions accounting by resolving three important questions:

• How should companies calculate and report electricity emissions?
• What types of energy purchases can count towards corporate emission reduction targets, using the market-based method?
• How can we ensure that corporate energy purchases are leading to real growth in low-carbon electricity and lower emissions in the sector over time?

You can also read Scope 2: Changing the Way Companies Think About Electricity Emissions by Mary Sotos, Associate, World Resources Institute and lead author of the new Scope 2 guidance.