Attn: Greenhouse Gas Protocol (GHG Protocol) Secretariat and Independent Standards Board
Dear GHG Protocol Secretariat and Independent Standards Board,
3Degrees supports GHG Protocol’s efforts to make greenhouse gas emissions reporting more credible to stakeholders and more useful to reporters seeking to maximize their impact. By better reflecting the physical realities of the electricity grid and increasing the accuracy of emissions estimates, the GHG Protocol can enhance the integrity of both corporate climate commitments and their emissions inventories.
At the same time, it is essential to carefully balance the pursuit of a more impactful and precise approach to GHG accounting with the challenges many sustainability leaders will face if the costs and benefits of their voluntary climate commitments evolve. An approach that forefronts precision will be more costly for all reporters. Increasing costs without commensurate benefits could lead to abrupt shifts in participation or levels of ambition, and could forestall near-term action even among companies still fully committed to their targets.
3Degrees strongly encourages GHG Protocol to consider the following core points as they continue to refine the scope 2 standard:
Voluntary corporate climate action is a powerful force but is also fragile. The cost/benefit balance of proposed accounting changes must be carefully struck to ensure the standard continues to provide a compelling foundation for broad voluntary action.
The proposed scope 2 changes create complex reporting requirements with the aim of improving accuracy and credibility of reported emissions. While accuracy and credibility are necessary, we fear the GHG Protocol is underestimating the burden the proposed approach creates in compiling any compliant emissions summary while overestimating the accuracy and credibility this new approach will provide across the vast majority of reporters.
According to the latest public data from CDP, 80% of all reported scope 2 emissions arise from just 10% of reporting companies. (And note, this calculation excludes SME reporters altogether.) In other words, ~500 companies worldwide create 80% of all publicly reported scope 2 emissions. This “extra-large scope 2 emitter” group warrants particular focus, but the opposite is also true: the much larger population of not-so-large emitters needs proper consideration.
Companies that use moderate amounts of electricity have limited financial and human resources dedicated to electricity management, bear less responsibility for electricity’s climate pollution, raise fewer stakeholder concerns regarding their electricity impacts, and have fewer opportunities to mitigate their scope 2 emissions.
Requiring granular reporting for all non-SME corporate reporters will introduce new layers of complexity in compiling proper reports, even with the carve-outs under discussion. In addition, the new methods will create a step-change in each company’s tabulated emissions, requiring all-new analyses and decision-making around voluntary reporting and related goals.
This level of disruption in the fragile ecosystem of voluntary climate commitments is fraught. Requirements to match clean energy with hourly load will result in a narrowed set of available climate actions, and will raise their cost. For lower-emitting companies, what value will the new calculations bring to balance these costs? Will a greater reporting burden with fewer available means of achievement inspire their ongoing participation in voluntary climate action? How many will quietly step away?
In a follow-up communication, we will offer evidence of the increased reporting burden as well as the lack of decision-useful information the new tallies will offer in most cases.
Making granular hourly reporting a requirement could reduce the credibility and usefulness of scope 2 emissions estimates in the near to medium term.
The important benefits of granular accounting are its increased credibility with stakeholders due to greater acceptance of its accuracy compared to today, and its ability to illuminate a reporter’s contribution to electricity emission hotspots in time and space, enabling reporters to take action to remediate these impacts. Today, such hotspots are muted by annual-average accounting methods across large geographies.
To achieve these benefits, though, much work is needed in the underlying information infrastructure – especially the ability to isolate facility-specific hourly electricity use alongside the concurrent hourly emissions of the particular electricity generation sources called upon to deliver that facility’s electricity, and/or purchased for book-and-claim purposes.
Without these detailed information streams, reported emissions will devolve into a semi-chaotic state as reporters navigate the new requirements using data substitutes and estimates that will vary by reporter and over time. Comparability among reporters and from year-to-year will deteriorate, and the promises of accuracy and insight will be unfulfilled.
In a follow-up communication, we will discuss the extent of the data gaps and the inadequacy of proposed substitutions and alternatives. Here, we provide an indicative list:
- Hourly energy use data is unavailable across broad swaths of corporate facilities. Using generic load profiles as a substitute sidelines key promises of the new standard since these profiles do not represent any facility’s emissions at an actionable level of detail.
- Granular electricity supply emission factors are also broadly unavailable in a form that supports electricity management and procurement decisions. Hourly emission factors computed across geographies are available in some places, but this location-based data is not useful in making market-based supply choices.
- Electricity vendors around the world can rarely provide “delivered mix” data on an annual basis and are ill-equipped to offer such data on a granular basis – whether for standard supply or for subscription offerings.
- The worldwide infrastructure that supports contractual delivery of electricity and of energy attributes (registries, trading exchanges, standard contracts, financial accounting practices, eco-labels, verifiers, etc.) is unprepared for granular requirements. The needed systems and practices will take years to emerge, and their implementation will raise buyer costs across every aspect of this supply chain.
We believe a positive way forward is to scale expectations of accuracy with the quantity of emissions reported, so as to balance the burden of compiling compliant emission reports with the benefits such reports provide to users, stakeholders and the climate.
3Degrees believes every company should be empowered to take urgent climate action, and should be inspired to become part of the solution. This means we need accounting systems whose burdens are proportionate to the impacts measured. It means we need flexibility or scalability in the proper procedures. It means we need continued availability of immediate action-levers, even if some levers deliver less earth-changing benefits than those expected of and available to the largest emitters. Erecting barriers that could diminish voluntary climate action does not seem to be a wise step to take.
In a follow-up communication, we will propose specific ways to scale the complexity of the accounting standard commensurate with emissions, and to manage the transition period to any new requirements – both with an eye to ensuring companies do not feel the need to pause, scale back, or set aside entirely their climate ambitions.
We hope that the GHG Protocol begins to consider these practicalities and potential implications of the revised standard as they continue internal discussions.
Sincerely,
3Degrees
