Tracking Biomethane Usage is Key to Achieving EU Climate Goals
Biomethane holds immense potential to contribute to Europe’s aggressive decarbonization goals. As using biomethane becomes an increasingly feasible and popular way to reduce an entity’s environmental impact, many are looking to the GHGP to provide guidance on how to account for their renewable gas transactions.
However, the GHGP has not yet issued formal or final guidance on this topic, essentially leaving it up to reporting entities and their auditors in the interim.
This article considers the benefits of market-based accounting for biomethane use and discusses the past, present, and potential future treatment of biomethane certificates under the GHGP.
Biomethane Certificates Reflect the Emissions Reductions Benefits of Biomethane Use
Biomethane is derived from the decomposition of organic waste in landfills or anaerobic digesters that process waste from food processing plants, agricultural facilities, or wastewater treatment plants. The decomposition process creates biogas, which is then captured, cleaned, and then either injected into the national natural gas pipeline or shipped to the point of consumption in the form of biomethane.
In order to ensure that the reduced emissions associated with using biomethane as a replacement for fossil gas are effectively verified and tracked, biomethane certificates, also referred to as Renewable Thermal Certificates in the U.S., have been developed as a market-based mechanism to account for the environmental benefits. Biomethane certificates serve to verify the renewable and low-carbon attributes of biomethane and help organizations accurately report their carbon reduction efforts.
Purchasing biomethane certificates in quantities that match all or part an entity’s natural gas use is an effective and direct way to address those natural gas emissions. Companies that purchase biomethane certificates to substantiate the use of biomethane may want to understand whether this reduces their Scope 1 emissions under the GHGP scheme.
Latest GHGP Guidance Leaves Open Questions for Market-Based Accounting of Biomethane
In the past, the GHGP’s publications have indicated both support for and opposition to the use of biomethane certificates to adjust a purchaser’s emissions. For instance:
+ GHGP’s original Scope 2 Guidance, published in 2015, included an annex stating that companies may leverage the market-based accounting framework for contractual procurements of biomethane. However, this annex was removed in 2020.
– GHGP’s draft Land Sector and Removals Guidance published in September 2022 stated that an “average data method” should be used to account for emissions of gas purchased from the common pipeline, and that biomethane certificates, including those purchased bundled with gas, may be reported separately from the scopes in an inventory report but cannot adjust emissions.
The latest statement from the GHGP regarding biomethane certificates came in an August 2023 blog post, which states that there is no definitive guidance from WRI on how to report biomethane purchases from the common carrier pipeline. It reads:
“In the absence of guidance, companies purchasing certificates may wish to consult with their auditors and consider rules provided by relevant target-setting programs or applicable regulatory schemes in their jurisdiction(s) on how to report these purchases in their reports, while ensuring full transparency and following all GHG accounting and reporting principles. “
The GHGP also comments that companies may separately report avoided emissions resulting from the use of biomethane using project or intervention accounting methods, separately from the scopes.The blog notes that more guidance will be provided on this topic in coming years. The GHGP is undertaking a more holistic analysis of the appropriateness of market-based accounting approaches in GHG inventories across sectors, end-uses, and scopes, which is expected to be completed over the next two to three years. WRI has confirmed that they will work closely with organizations such as the RNG Coalition and the European Biogas Association on this process. 3Degrees believes that the GHGP will define a transparent, comprehensive methodology that allows for the use of biomethane certificates to adjust gas emissions, but this will take time.
Considerations for Companies Reporting Biomethane under GHGP
In Europe, the market for biomethane certificates is still developing, with a blend of voluntary and regulated registries. Cross-border trade of these certificates is currently only possible amongst a few European countries. However, based on Europe’s policy focus on the role of biomethane in climate change mitigation strategies, 3Degrees expects these markets to flourish soon.
Without definitive guidance from GHGP, 3Degrees recommends companies use the frameworks put forward by regulatory programs and/or the prior GHGP guidance from the Scope 2 annex, while also consulting with their auditors and being transparent about their use of market-based accounting. As the market further develops and the GHGP works towards final guidance, we look forward to working with our clients on biomethane solutions to help meet their emissions targets.
The 3Degrees’s Energy & Climate Practice team is ready to provide support and guidance biomethane certificate market. Get in touch with our team to learn more.