GHG Protocol prioritizes looking good over doing good

Last month, the GHG Protocol dropped a bombshell on clean energy markets. Through a blog post and meeting minutes, we learned that the GHGP Independent Standards Board, or ISB, had voted to disregard the recommendation of its experts, walk back expectations previously set publicly, and prioritize optics over impact.

This explosive development relates to the GHGP’s revision process for Scope 2 accounting that governs how organizations calculate the emissions associated with electricity use and clean energy purchases.

And before you dismiss this concern as the realm of wonkish energy nerds, know this: In the U.S. alone, carbon accounting has supported the development of over $150 billion of clean energy infrastructure. Changes to the GHGP Scope 2 Protocol will absolutely shape how much clean energy infrastructure we build in the decade ahead — for better or for worse.

GHGP thumbs its nose at emissions experts and the public

There were two major decisions ahead of the ISB for a vote: whether to advance hourly matching as a mandate for inventory accounting, and whether to advance an impact accounting metric in parallel. Prior to the ISB vote, nearly 40% of the expert Technical Working Group, or TWG, that is tasked with developing the technical standards voted against hourly matching as a mandate, while 74% of TWG members voted to advance impact accounting in parallel as a critical, complementary methodology.

Despite the widespread TWG support, the ISB voted not to advance impact accounting to the public comment period in parallel with hourly matching, while all but a single dissenting ISB member voted to advance the plan to mandate hourly matching.

Some have argued that the ISB didn't kill impact accounting, but merely sent it on a different path. This is nonsense. The public notes show the ISB prefers not to allow impact accounting for corporate target-setting of net emissions — which would render it functionally useless — and has delayed its public consultation, placing it on an uncertain timeline no longer in parallel with hourly matching. It also stated a need for an increasingly rigorous additionality test, raising doubts about real-world feasibility. So, while the ISB did not explicitly kill impact accounting, they did vote to mortally wound it.

So what happened? How did GHGP’s revision process take such a late, wrong turn? And why do I care? Why should you care?

The world needs voluntary corporate action that leads to the fastest emissions reductions possible. To that end, we need a viable and useful impact accounting option under the GHG Protocol to maintain and expand the accessibility of voluntary clean energy procurement, and to maximize the real-world emissions impact of those actions.

It’s widely accepted that consequential accounting (aka impact accounting) is the best metric available to incentivize high-impact investment in new projects. That’s because — as its name implies — it focuses on measuring the system-level impact of energy consumption and clean energy procurement over simply allocating existing emissions to consumers of power.

Impact accounting calculates two fundamental numbers: the emission impacts caused by an organization's electricity consumption, and the emission impacts caused by an organization's procured clean energy generation. As soon as you embrace that basic premise, you empower and incentivize organizations to site and operate their consumption to minimize the negative impact of their consumption, and to site and operate their clean energy procurement to maximize the positive impact.

Mandated hourly matching’s costs outweigh the benefits

Hourly matching has its merits toward certain goals under specific conditions. It has the potential to yield a more rigorous attributional inventory. It can create an incentive for clean firm generation, such as geothermal and nuclear. And at very high matching percentages (i.e., >90% hourly matching), it can achieve greater avoided emissions as compared to the current status quo of annual matching.

But that’s about where the benefits stop and the long list of problems begins.

Hourly matching incentivizes more renewable energy where clean energy is already abundant (e.g., Global North power grids where large corporations concentrate their loads) at the expense of where that investment is most needed and most valuable.

Hourly matching can unintentionally incentivize poor grid citizenship, per McKinsey, when entities prioritize self-centric reporting over system-level needs. Hourly matching not only allows, but incentivizes procurement of RECs from existing clean, firm projects, such as legacy hydro and nuclear over investment in new infrastructure.

Operationally, hourly matching is “absolutely impossible” for many distributed and variable load profiles. Hourly matching is expensive: analysis from experts such as TCR find a significant cost premium. And while many organizations have signaled a willingness to pay premiums to increase their impact, few have shown the same appetite to pay a premium for accounting benefits alone.

Given all those challenges, mandating location and hourly matching is expected to be destructive to voluntary demand, as has been pointed out repeatedly by NGOs and a variety of trade groups, including both the buyers and the sellers of clean energy.

Lastly, experts from Carnegie Mellon, Cornell, Johns Hopkins, Stanford, Minnesota, Texas and many others agree that hourly matching’s on-paper benefits “rely on simplified assumptions that do not reflect the economic or physical realities of project development or grid operations.” Harvard’s renowned power market expert Bill Hogan was more blunt: “24x7 matching of individual generation and load is not workable.”

A chorus of experts and stakeholders has been sounding the alarm on this issue with increasing urgency. Beyond the sources above, those shouting include non-profits (GHG Institute, RMI), academics (MIT, University of Cologne), consultants (E3, Green Strategies), startups (Ever.Green, Clearloop) and individual experts (Jigar Shah).

Despite all these voices, the GHGP appears to be caving to a vocal minority of hourly matching advocates focused on ensuring their procurement preference becomes a requirement for the entire voluntary market.

It’s not too late for GHGP to course correct

The lure of hourly matching is that it fights against a trope common among clean energy antagonists: How can companies claim to be powered 100% by renewable energy when the wind doesn’t always blow and the sun doesn’t always shine?

My response to that? Carbon doesn’t care if it’s emitted at night in California or during the day in Virginia: it warms the planet all the same. The focus of the GHGP should not be on backing usage claims about what power a company is consuming — something impossible to prove given grid dynamics — but to measure carbon emissions as accurately as possible.

So, if you wake up in the morning passionate about allocating blame for existing emissions, then you should applaud the ISB’s current trajectory. But if instead you care, as I do, about accelerating the development of valuable clean energy infrastructure and advancing our fight against climate change, then please join me in advocating for an about-face for the GHGP’s current trajectory.