How to Make Hourly Scope 2 Allocational Accounting Work? Roger and Patrick explore this question in a recent article published by SSRN. Read on to learn more.

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Abstract

The Greenhouse Gas Protocol (the Protocol) was established as a global standard guiding consistent accounting and reporting of corporate greenhouse gas emissions. A central purpose of the Protocol’s Scope 2 standard is to accurately allocate electricity-sector emissions from electricity generation to consumers of electricity. In an accurate and complete allocation of emissions, all emissions from electricity generation and transmission (scope 1) would be fully allocated to electricity consumers (scope 2). Those who are in the process of updating the Protocol’s Scope 2 Market-Based Method (MBM) are considering a range of differing ideas and proposals to improve the current system and increase the accuracy of the allocation of electricity-sector emissions to individual companies.

One of the leading proposals for how to update the Protocol recommends matching clean energy attributes to electricity consumption on an hourly basis within a given market boundary — often referred to as 24/7 or hourly matching. Advocates say it’s a more precise and transparent way of linking clean power to corporate demand. However, current proposals for how to implement 24/7 would add substantial double counting and deliverability issues to the MBM, which could actually make carbon accounting significantly less accurate.

These issues must be resolved. First, the 24/7 framework must find a way to prevent the potential double counting of emissions, and second, it must demonstrate actual electricity deliverability to the point of consumption and account for transmission congestion.

The adoption of 24/7 proposals by the Protocol revision process runs the risk of making Scope 2 emissions accounting less accurate. The following paper takes a closer look at what it would really take to implement 24/7 accounting without sacrificing accuracy and feasibility.

SSRN 4.16.25

Special Edition Blog from Green Strategies Senior Advisor, Miranda Ballentine

After a slow year in 2023, you might have wondered if corporates were backtracking on their clean energy ambitions. Well, 2024 marks ten years since the Clean Energy Buyers Alliance (CEBA) started counting carbon-free energy (CFE) deals announced by voluntary energy buyers, and let’s just say…the market is hot!

In 2024, companies announced more clean energy deals than ever; they surpassed a huge milestone; and they broke records with new deal structures and power technologies.

Just the facts, Ma’am. CEBA’s 2024 Deal Tracker, its annual overview of market trends in voluntary clean energy procurement, marks several exciting developments. 235 clean energy customers have made clean energy deals since 2014, with 49 unique customers in 2024. Voluntary clean energy deals announced by corporates surpassed 100 GW, cumulative, since 2014. That’s equivalent to 41% of all clean energy added to the grid since 2024. Go corporate buyers! 21.7 GW were announced in 2024, making 2024 the highest single year to date.

Think all of that’s impressive? Let’s take a look back to what we aspired for a decade ago when a small, loose-knit community came together to set mutual ambitions in 2014.  Let’s also look at where we were in 2019, an important year both because it was CEBA’s first official year as a new organization, and because 2019 marked the beginning of many of the market trends that are coming to life today.

Looking back 5 and 10 years. CEBA’s original founding goal set in 2014 was 60 GW by 2025, and we all thought 60 GW was going to be extraordinarily hard to hit (remember, in 2014, we only had three buyers in the market, with just 1.2 GW procured!). Fast forward five years to the 2019 CEBA (then REBA) Spring Member Summit in Orlando (hosted by Disney, oh that one was FUN!), the 2018 Deal Tracker calculated just over 16 GW of clean energy deals had been announced by 70 voluntary buyers since 2014

Mind-bogglingly, the original 60 GW goal was achieved in 2022—three years early. Thus, 2024’s 100 GW announcement is a huge milestone—67% more than what was originally thought possible by this time, thanks to voluntary procurement by 235 motivated companies.

Technologies of choice. You might now be familiar with large solar arrays dotting buildings and landscapes, but from 2014 to 2018, wind power was still much more popular than solar, accounting for 55% of renewables deals announced in 2018. The market for large, utility scale solar projects was just not there…yet. Then, in 2019, it flipped. Large developers previously focused mostly on wind began offering low-cost solar options from well-known developers. Prices for solar technologies plummeted, putting it on par with wind. (Now, wind and solar are nearly tied for lowest levelized cost of energy out of all sources in the country, according to Lazard). In 2019, solar represented nearly 60% of contracted capacity. Since then, solar has remained the most popular renewable technology by far – in CEBA’s 2024 deal tracker, we see that solar represented over 73% of contracted clean energy. The inertia behind solar is strong, even as other decarbonization technologies are added to the mix. We don’t expect this to change any time soon.

A shift in the ends and the means. Also at the 2019 CEBA Summit, a live poll showed that over a third of CEBA members expected focus to shift increasingly towards all forms of carbon-free energy that can generate power around the clock, any time we need it.  Renewables were beginning to become a means to a carbon-free end. This year, investments in storage, geothermal, and new nuclear in 2024 prove that this trend is kicking off. 2018 was the first year in which battery storage was deployed. This year, we see battery storage is one of the top three most common technologies – 1.7 GW of battery storage was added by voluntary buyers in 2024.

Nuclear power was added to the mix of announcements for the first time in 2024 – 1.5 GW were announced. Typically, large tech companies have been the leaders supporting this type of around-the-clock clean energy, but this year we were excited to see Brookfield Properties announcing that their DC area office portfolio is now powered by nuclear.

In addition, Google, and Meta (a Green Strategies’ client) will each procure more than 100 MW of geothermal, another carbon-free resource.

If 2019 was the beginning of voluntary procurement recognizing that renewables are one of multiple tools to decarbonize the grid, 2024 may go down as the year in which all means towards grid decarbonization were truly ushered in.

Other things I noticed: Green Strategies’ clients like Meta and Walmart (full disclosure, I used to work for Walmart!) were again top buyers in 2024. Meta, in fact, has been a top-two buyer for four years in a row (Meta dropped to #5 in 2020, but was the top buyer from 2017-2019 as well). Walmart, in addition, continues to support new deal structures like inventive community solar projects. New deal structures across the market are growing in popularity as well. Out of 2.5 GW procured using tax equity investments since 2014, 1.1 GW was procured in 2024 alone.

So, another monumental year for clean energy. After a slowdown last year, it looks like corporates are doubling down on deals, and that trends first anticipated over 5 years ago are here to stay. Green Strategies looks forward to more analysis of the 2024 Deal Tracker from the CEBA team, and to celebrating these milestones with you at CEBA’s 2025 Summit this spring in Minneapolis. Thanks for walking down memory lane with me – let’s keep this positive momentum going.

Last week, the Science-Based Targets Initiative (SBTi) released a highly-anticipated consultation draft of their Corporate Net-Zero Standard, Version 2.0 (CNZS V2.0). Green Strategies has been closely watching SBTi’s treatment of key issues (see Ballentine 2023; Ballentine 2024) with the hope that SBTi’s next standard will better maximize real climate action and emissions reductions.

While SBTi has included an excellent comparison of the draft Version 2.0 and the older Version 1.2 (see page 10 of the consultation draft with narrative), Green Strategies reviewed CNZS V2.0 for its treatment of key issues facing our clients, including Scope 2, Scope 3, and investment in carbon dioxide removals.

We are happy to see that:

• SBTi has embraced the idea that a science-based climate action framework should incentivize action and progress, as opposed to primarily goal-setting ambition. In the draft standard, the new SBTi validation model is an “end-to-end” framework that better tracks and substantiates progress by: assessing and communicating progress at the end of the target cycle (a fixed 5-year time period, at least for Scopes 1 and 2); establishing new targets for the next cycle; and requiring companies to communicate transition plans.
• SBTi-target setting companies will now make public Net-Zero commitments in line with the UN High Level Expert Group recommendations. This is a step towards unifying practices for corporate net-zero attainment and avoiding duplication of definitional and reporting efforts.
• SBTi newly acknowledges the “urgency of addressing emissions released into the atmosphere today and the critical role companies can play in mobilizing finance for mitigation activities beyond their value chain.” As such, SBTi will examine provisions to require or reward companies for pursuing beyond value chain mitigation (BVCM) ahead of the net-zero target date.
• SBTi has allowed the purchase of removals to occur earlier than the net-zero target deadline, which is crucial to avoiding emissions overshoot and to providing finance for the carbon removals market that will need to scale up between now and net-zero target dates.
• SBTi has indicated greater tolerance for indirect mitigation, acknowledging the importance of investment in mitigation actions crucial for the net-zero transition even if the action cannot be physically traced back to sources within the company’s value chain.
• SBTi will now allow emissions data and interventions at the ‘activity pool’ level to assess performance and progress towards targets in cases where traceability to specific emissions sources in the value chain cannot be established, but where interventions in the likely supply shed are possible and impactful.
• SBTi has adopted a “technology-agnostic” stance, introducing zero-carbon electricity targets as a revision to the concept of renewable electricity targets. This rightly acknowledges the need for a broad array of zero-carbon electricity generation, including firm and dispatchable resources.

We applaud SBTi for being responsive to stakeholder feedback and making strides towards these changes. However, certain criteria in the draft CNZS 2.0 may need further consideration:

• Scope 2:
  • SBTi will now require companies to set location-based Scope 2 targets in addition to either a market-based or a zero-carbon electricity target. We hope SBTi will further elaborate on how companies will make progress against location-based Scope 2 targets. Currently, companies use the market-based method to reduce Scope 2 emissions because they have limited control over location-based emissions other than through electricity conservation. We are concerned that achieving a location-based Scope 2 target may not be possible in many areas due to the realities of the electrical grid and regulatory frameworks.
  • SBTi provides a provision for when sourcing zero-carbon electricity (ZCE) within the grids in which the company powers its operations is not possible. In this case, companies shall “contribute to zero-carbon electricity in other grids as an interim measure to address the corresponding portion of scope 2 emissions.” We would like SBTi to specify the threshold for when a company many conclude that procuring ZCE is “not possible” and to define the boundary of “other grids.”

• Scope 3:
  • SBTi states that it has adopted a more focused approach for the Scope 3 boundary, indicating that companies should set Scope 3 targets on “the most emission-intensive categories within their value chain and those where they have the greatest influence.” SBTi defines the most relevant Scope 3 categories to be those that comprise 5% or more of total Scope 3 emissions. We feel that this is not sufficiently narrow and does not fully capture which Scope 3 emissions are most relevant to a sector.

• Direct and Indirect Mitigation:
  • SBTi outlines distinctions between direct and indirect mitigation approaches, which are both distinct from BVCM. SBTi should provide greater clarity on the time limitations and reporting for indirect mitigation including book and claim and mass balance systems. We feel that these approaches should be eligible to make progress against SBTs. If not, we would like SBTi to specify how it will incentivize companies to invest in indirect mitigation. We also caution that reporting indirect mitigation measures separately from direct mitigation, as SBTi currently instructs, runs the risk of making these valid climate interventions into a second-tier approach and once again poorly incentivize needed investment in markets supported by book-and-claim approaches.
  • SBTi should clarify the “direct mitigation” threshold for demonstrating physical connectedness, and whether chain of custody approaches like mass balance count as direct or indirect mitigation.

• Non-emission metrics and targets:
  • SBTi states that CNZS V2.0 places greater emphasis on non-emission metrics and targets, for example the procurement from suppliers aligned with global climate goals. We support allowing companies to receive credit from actions that may not impact their inventory but are beneficial to the climate. SBTi should provide further guidance on how SBTi will incentivize and validate these non-emissions metrics and targets. Will there be a standard level of ambition, or standard ‘menu’ of non-emissions metrics to choose from? Will companies need to set a net-zero goal in order to be eligible for an SBTi-approved non-emissions target?
  • SBTi should discuss whether consequential accounting, or the assessment of the carbon impact of certain decisions, is a valid non-emissions metric. SBTi should also consider requiring a discussion of impact and optional quantification of impact, such as for procurement of zero-carbon electricity or other low-emissions products and services.

The public consultation period will be open until June 1^st, 2025, and feedback can be submitted via an online survey.

Please see the job description and application information below.

Associate_Manager Job description

Another Nerd Alert: The third in Roger Ballentine’s series of peer-reviewed articles on the urgency of updating greenhouse gas accounting and corporate climate leadership programs to better optimize the role that companies can play in meeting the challenge of the climate crisis was published yesterday in the Journal of Carbon Management. This paper is about incentivizing, reporting, and rewarding what matters most: impact.

Corporate climate decision-making is guided by a complex “rules and rewards ecosystem” of voluntary greenhouse gas accounting rules, disclosure platforms, and target setting frameworks. If assessed by the increase in the number of companies participating in these voluntary accounting, disclosure, and target-setting programs, the system has been a remarkable success. However, when assessed against metrics more closely tied to climate science – the amount of capital being deployed to fund the net zero transition as well as societal progress in reducing atmospheric greenhouse gases – the rules and rewards ecosystem is falling short. More than two decades on, the rules and rewards ecosystem remains focused on the creation and disclosure of corporate greenhouse gas “inventories”. The theory of change under these voluntary “attributional” accounting and disclosure systems is that “what gets measured gets managed”. While flawed, the incumbent approach largely serves the first step of “measurement”, but it is not well designed to incent the “management” of GHG emissions. It is time to finish the job and focus on management by elevating impact accounting, disclosure, and incentives and improve how companies are asked to set and execute against climate targets. Done properly, a “dual ledger” approach can better incentivize and reward corporate expenditures that provide actual climate benefits while reducing the significant non-impactful expenditures that companies are asked to make under the current – and unfinished – rules and reward ecosystem.

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Read the full journal article –  The unfinished business of corporate greenhouse gas accounting and target-setting frameworks: incentivizing, enabling, and counting impact through a dual ledger

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