Renewable Energy Purchasing and the Market-based (Scope 2) Method

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.

Get in touch

For further information, accessible versions of these documents, or to suggest additional material for this page, please contact Matthew Brander.

Research articles

Ma and Duan (2024). Double Counting of Emission Reductions Undermines the Credibility of Corporate Mitigation Claims. Environmental Science & Technology
Brander et al. (2024). Scope 2 and market-based accounting - workshop report. Carbon Management
Backstrom et al. (2024).Corporate Power Purchase Agreements: A Policy Perspective.SSRN
Xu et al. (2024). System-level impacts of voluntary carbon-free electricity procurement strategies. Joule
Langer et al. (2023). Does the purchase of voluntary renewable energy certificates lead to emission reductions? A review of studies quantifying the impact. SSRN
Ballentine (2023). The unusual suspects: are well-meaning environmental stakeholders and institutions undercutting the contributions that companies can make to fighting climate change? Oxford Open Climate Change
Brander and Bjørn (2023). Principles for accurate GHG inventories and options for market‑based accounting. International Journal of Life Cycle Assessment
Galzi (2023). Do green electricity consumers contribute to the increase in electricity generation capacity from renewable energy sources? Evidence from France. Energy Policy
Ricks et al. (2023). Minimizing emissions from grid-based hydrogen production in the United States. Environmental Research Letters
Bjorn, Lloyd, Brander, and Matthews (2022). Renewable energy certificates threaten the integrity of corporate science-based targets. Nature Climate Change.
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 and 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 and 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 and 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 and Palmer (2007). Electricity disclosure: the troubled birth of a new policy. Energy Policy.
Markard and Truffler (2006). The promotional impacts of green power products on renewable energy sources: direct and indirect eco-effects. Energy Policy.
Wüstenhagen and Bilharz (2006). Green energy market development in Germany: effective public policy and emerging customer demand. Energy Policy.

Letters

Reports

Ever.green (2024). High-Impact RECs: Applying Additionality for Renewable Energy Advancement.
New Climate Institute (2024). Navigating the nuances of corporate renewable electricity procurement: spotlight on fashion and tech.
Cornwall Insight and Ovo Energy (2023). REGOs and Decarbonisation.
Hamburger (2022). Evaluation of guarantees of origin as a regulatory tool for sustainable energy (PDF).
Bjorn, Lloyd, Brander, and Matthews (2022). Renewable energy certificates allow companies to overstate their emission reductions. Nature Climate Change.
New Climate Institute and Carbon Markets Watch (2022). Corporate Climate Responsibility Monitor 2022 (PDF).
Committee on Climate Change (2020). Briefing note – corporate procurement of renewable energy: implications and considerations (PDF).
Martinsen and Mouilleron (2020). Guarantees of origin for electricity – an analysis of its potential to increase new renewable energy in the North European energy system.
Seebach and Timpe (2020). Empowering green energy consumers in Europe to make a real difference (PDF).
Wimmers and Madlener (2020). The European market for guarantees of origin for green electricity: a scenario-based evaluation of trading under uncertainty.
Smith (2019). What effect does the use of renewable and low-carbon electricity contractual instruments have on firms' other GHG mitigating activities? (Word)
Ademe (2018). Les offres d’électricité verte (PDF).
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 (PDF).
Öko-Institut (2015). Electricity Disclosure and Carbon Footprinting: Effects and incentives resulting from different approaches to account for electricity consumption in carbon footprints (PDF).

Press Releases

UK Government (2021). Government to tighten rules to stop 'greenwashing' of electricity tariffs.
Ofgem (2014). Ofgem proposes improvements to green tariffs to improve protection for consumers.

Renewable Energy Directive

Council of the European Union (2018). Renewable Energy Directive (PDF).

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