Corporate climate accounting sits at an inflection point. The Science Based Targets initiative (SBTi) released its V2.0 Corporate Net Zero Standard (CNZS) this summer. The Greenhouse Gas Protocol (GHGP) is also undergoing its most significant refresh of corporate Scope 2 accounting in a decade, which includes potential changes to the Actions & Market Instruments (AMI) Standard that may enable buyers to better "count" what matters by considering the differentiated decarbonization potential of supporting clean energy projects located in more versus less carbon-intensive regions.
Together, these developments will reshape how companies set climate targets, account for their clean energy procurement, and report on progress. This has implications for buyers considering higher-impact options like Peace Renewable Energy Credits (P-RECs).
Historically, the market for clean energy procurement options that deliver maximum decarbonization impact and community benefits has remained under-tapped. This is because higher-impact solutions have too often remained invisible within greenhouse gas accounting frameworks like SBTi and GHGP. For example, if a given procurement option does not “count” under one of these frameworks, then voluntary corporate buyers with sustainability goals have typically hesitated to procure them.
SBTi’s V2.0 CNZS has now introduced two powerful new incentives for impact-focused buyers, which clarifies gaps in prior CNZS guidance around how to account for actions supporting value chain (Scope 3) emission reductions as well as climate mitigation and adaptation solutions that do not neatly fit into traditional carbon accounting inventories:
EACs for Scope 3 emissions: First, SBTi now allows companies to claim broader Scope 3 emission reductions by supporting clean energy procurement across their value chains. Specifically, companies can now procure energy attribute certificates (EACs) like P-RECs and assign them to their value chain partners’ electricity use to decarbonize their partners’ electricity-based (Scope 2) emissions. This accounting clarity will help create incentives that ultimately help increase demand for clean energy. It will also promote P-RECs as an option for reducing value chain partner Scope 2 emissions. Legacy market boundary rules may not apply to Scope 3 actions, so companies may be able to use P-RECs to decarbonize value chain partners’ electricity use that happens anywhere globally—potentially unlocking a notable new demand source for P-RECs.
Counting climate contributions for ongoing emissions: Second, SBTi created an optional recognition program for companies that support higher-impact clean energy solutions that don’t neatly fit into traditional greenhouse gas accounting metrics. SBTi’s new program, called Ongoing Emissions Responsibility (OER), asks companies to take financial responsibility for their remaining emissions on the path to net-zero. The OER “Contribution Budget” (also known as “Money-for-Ton”) pathway entails having companies apply an internal carbon price to their ongoing emissions, then allocating the resulting budget toward high-impact mitigation solutions. P-RECs can serve as an option for OER’s Contribution Budget pathway because they channel vital climate finance to high-impact projects in some of the least electrified and most fragile countries, provide a critical new revenue stream that de-risks projects and unlock financing, and promote adaptation and resilience by replacing polluting generators with distributed renewable mini-grids to power hospitals, schools, and businesses.
OER is novel because it offers a framework that gives impact-focused companies a credible pathway to fund clean energy projects outside their value chain that also leverages existing leadership or board approval of a company’s science based targets.
EPP has created a simple, new tool—the OER Targets Navigator, which has been added to our P-REC Avoided Emissions Calculator—to help corporate clean energy buyers determine how many P-RECs can help them achieve their OER targets. Once buyers input their ongoing emissions and internal carbon price, the calculator estimates the number of P-RECs necessary to achieve any of the three OER tiers: recognized (1%), scale-up (10%), and leadership (40%), where these percentages reflect the percentage of emissions for a company will take action to mitigate or make climate-related financial contributions. The calculator uses underlying avoided emission estimates based on recent research about the emissions impact associated with how P-RECs expand energy access with carbon-free renewable mini-grids while displacing the use of diesel, charcoal, and other highly polluting energy sources. It also includes template language for OER-related claims.
SBTi’s V2.0 CNZS offers an opportunity for buyers (and the advisory firms that help many buyers build their strategies) to prioritize higher impact solutions like P-RECs because they now “count” in more places, from Scope 3 to OER. Buyers thus have gained a new option to apply P-RECs in order to make progress on different aspects of their science-based targets. This makes P-RECs more flexible in terms of how buyers assign the resulting environmental claim in their reporting and increases their value as part of the annual portfolio of clean energy solutions that buyers build to make progress toward their targets.
Buyers can learn more about how the new and emerging rules of corporate climate accounting are changing the decision-making landscape for impact-focused buyers in this recent webinar moderated by EPP with speakers from 3Degrees, RECS Energy Certificate Association, and WattTime. Buyers interested in learning more about how to use P-RECs to decarbonize their value chain partners electricity use and/or how to make P-RECs part of their OER Target strategy should contact Doug Miller, EPP’s Director of Market Development, at dmiller@energypeacepartners.com.