Carbon Accounting Changes Could Lift Corporate Greenhouse-Gas Emissions

Under current standards, businesses can claim to be using 100% renewable energy as long as they offset their use of fossil fuel-generated electricity with credits from wind or solar projects in the same general power market, such as the whole of the U.S. or the European Union. For example, a company with a factory in Ohio could buy renewable-energy certificates for power from a Texas wind farm and use the certificates to offset its fossil-fuel electricity consumption in Ohio. 

One change being discussed would restrict emissions accounting to electricity from the same grid region, which would mean these kinds of claims wouldn’t be possible since Texas and Ohio are in separate grid regions. The American power market has three major grid regions, which are divided into 26 subregions, according to the U.S. Environmental Protection Agency. 

Rules limiting renewable-energy claims to within the smaller subregions would improve the accuracy of emissions accounting because companies would be more likely to actually use the renewable electricity paid for with their certificates. 

Another change being discussed would only allow companies to claim they are using renewable energy if the electricity was generated at the same hour of the day that the company was using power from the grid. A 2023 Princeton University study analyzed the emissions effect of location and hourly matching requirements. Lead author, Wilson Ricks, said the restrictions would force companies to do the hard work of sourcing carbon-free electricity to supply their needs when and where these occur. “The result would be that claims of 100% carbon-free electricity become much harder to make, but also much more believable,” Ricks said. 

According to a 2022 study, companies that don’t account for hourly and location data could be under- or overestimating their emissions by 35%. A recent review by carbon management firm FlexiDAO of 22 multinationals that bought renewable electricity across 27 countries found that they could be underestimating their electricity emissions by close to 50% under the current system.

“It gives the false impression of achievement and it’s too easy for companies to say, ‘I’m done. I’m 100% renewable, I’ve bought enough stuff, I’m good to go, I’m zero emissions,’” FlexiDAO Chief Executive Simone Accornero said. “That’s clearly not the case.”

However, respondents to a GHG Protocol survey from November 2022 to March 2023 were split between moving to more granular data or maintaining the current rule’s flexibility, said Kyla Aiuto, research associate at the World Resources Institute, the nonprofit co-managing the GHG Protocol with the World Business Council for Sustainable Development. 

Google’s published comments to the survey supported the change: “Purchasing clean energy on the same grid where consumption occurs is the best way to create an inventory that accurately reflects the physical realities of the grid and directly addresses the emissions associated with a company’s operations.” 

The tech company is aiming to use so-called 24/7 carbon-free energy by 2030, which essentially means using power from clean energy sources like nuclear or renewables in its operations around the clock. Google reached 66% on an hourly basis in 2021. Microsoft has a similar goal and also supports restricting accounting to tighter locations.

However, Emissions First partnership—a group including Facebook -parent Meta, General Motors, Heineken and Amazon —is pushing instead for a new method to be added to the GHG Protocol that allows companies to account for avoided emissions from a renewable-energy investment regardless of where it is in the world.

The broader approach would help deliver a fast, cost-effective and scalable way to decarbonize power grids, said Jake Oster, Amazon Web Services’ director for energy and environment policy in the EMEA region and spokesman for Emissions First.

The GHG Protocol secretariat is reviewing the more than 1,400 survey responses, around 400 of which mentioned Scope 2. Other areas of focus were emissions in the value chain, or so-called Scope 3 emissions, market-based accounting approaches, and corporate accounting and reporting standards.

The group plans to conduct more surveys, convene technical experts and seek feedback on proposals before changes are made. An update could come as early as 2025.

Write to Dieter Holger at dieter.holger@wsj.com