Electricity generation accounts for roughly 25% of global greenhouse gas (GHG) emissions annually. Ensuring these emissions are measured accurately so that action can be taken to reduce them is essential for tackling climate change.
However, the ‘market-based method’, which is becoming increasingly prevalent, encourages companies to buy green energy certificates and claim zero total emissions from electricity use. There are at least two major problems with this practice:
- The market for contractual emission factors/renewable attributes does not increase the amount of renewable generation (and therefore does not help to reduce emissions)
- The market-based method results in GHG accounts that do not accurately reflect the emissions caused by organisations’ activities
There is a growing body of research and evidence on the problems caused by this practice. This page is intended as a hub for research and information on this issue.
Research and Further Information
- Herbes et al. (2020). Are voluntary markets effective in replacing state-led support for the expansion of renewables? – A comparative analysis of voluntary green electricity markets in the UK, Germany, France, and Italy. Energy Policy.
- Hamburger (2019). Is guarantee of origin really an effective energy policy tool in Europe? A critical approach. Society and Economy.
- Hulshof et al. (2019). Performance of markets for European renewable energy certificates. Energy Policy.
- Brander, Gillenwater, and Ascui (2018). Creative accounting: A critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions. Energy Policy.
- Hamburger & Harangozó (2018). Factors affecting the evolution of renewable electricity generating capacities: a panel data analysis of european countries. International Journal of Energy Economics and Policy.
- Monyei and Jenkins (2018). Electrons have no identity: Setting right misrepresentations in Google and Apple’s clean energy purchasing. Energy Research & Social Science.
- Nordenstam et al. (2018). Corporate greenhouse gas inventories, guarantees of origin and combined heat and power production – analysis of impacts on total carbon dioxide emissions. Journal of Cleaner Production.
- Dagoumas & Koltsaklis (2017). Price signal of tradable guarantees of origin for hedging risk of renewable energy sources investments. International Journal of Energy Economics and Policy
- Hufen (2017). Cheat electricity? The political economy of green electricity delivery on the Dutch market for households and small business. Sustainability.
- Mulder & Zomer (2016). Contribution of green labels in electricity retail markets to fostering renewable energy. Energy Policy.
- Hast et al. (2015). Review of green electricity products in the United Kingdom, Germany and Finland. Renewable and Sustainable Energy Reviews.
- Gillenwater, Lu, and Fischlein (2014). Additionality of wind energy investments in the US voluntary green power market. Renewable Energy.
- Gillenwater (2013). Probabilistic decision model of wind power investment and influence of green power market. Energy Policy.
- Gillenwater (2008). Redefining RECs (Part 1): Untangling attributes and offsets. Energy Policy.
- Gillenwater (2008). Redefining RECs (Part 2): Untangling certificates and emission markets. Energy Policy.
- Boardman & Palmer (2007). Electricity disclosure: the troubled birth of a new policy. Energy Policy.
- Open Letter Rejecting the Use of Contractual Emission Factors in Reporting GHG Protocol Scope 2 Emissions
- Letter from Caroline Lucas MP to BEIS
- Technical Appendix to Caroline Lucas’ Letter to BEIS
Renewable Energy Directive
- Council of the European Union (2018). Renewable Energy Directive.
- Smith (2019). What Effect Does the Use of Renewable and Low-carbon Electricity Contractual Instruments Have on Firms’ Other GHG Mitigating Activities?
- Ademe (2018). Les offres d’électricité verte.
- Brander (2018). One Page Summary: Problems Created by Market-based Method for GHG Accounting.
- Gold Standard (2017). Ensuring Renewable Electricity Market Instruments Contribute to the Global Low-Carbon Transition and Sustainable Development Goals.
- Öko-Institut (2015). Electricity Disclosure and Carbon Footprinting: Effects and incentives resulting from different approaches to account for electricity consumption in carbon footprints.
UK Standard Licence Conditions
- Ofgem (2015). Rules to protect domestic consumers from non-additional green tariff electricity by requiring additionality.
Ofgem Press Release
UK Government Statement
I want to make sure that the green tariff market, which has grown rapidly over recent years, is clear for consumers and businesses about the precise benefit their tariff brings. Many energy suppliers offer green tariffs to businesses and domestic customers who want to make a contribution to environmental projects or help tackle climate change, but these differ in what they deliver.
It is increasingly difficult to demonstrate that buying a renewable electricity tariff is offering additional carbon emissions reductions compared with what suppliers are required to source to meet the Renewables Obligation. I have therefore decided that we will change the voluntary corporate reporting guidelines to bring them into line with current best practice and provide coherent carbon accounting. This will mean that for the reporting year 2008-9, best practice is expected to be for businesses to use a grid average rate – average rate of carbon emissions associated with electricity transmitted on the national grid – unless their supplier can prove the carbon benefits are additional.
Secretary of State for the Environment (2008)
Source: Defra Archive
- Which (2019). How green is your energy tariff?
- Environmental Finance (2018). New ISO standard takes an important step to end corporate ‘greenwashing’.
- Ethical Corporation (2018). New rules to crack down on ‘greenwash’ in corporate clean energy claims.
- Euractiv 2017. Guarantees of origin for renewable power set for (overdue) scrutiny.
- Dutch TV (2018). Groene stroom – Zondag met Lubach (S08).
- Smith (2020). Making sure organisations’ climate change targets are not part of a zero-sum game
- Corradi (2018). Do renewables always reduce carbon emissions?
- Corradi (2018). Why green electricity contracts fail to deliver green electricity
- Gowdy/Regen (2018). We need to talk about green energy tariffs
- Wolfram (2018). What are you getting if you buy clean electricity?
- Gillenwater (2015). Have you fallen for the green power accounting shell game?
Get in Touch
For further information or to suggest additional material for this page, please contact Dr Matthew Brander.