Creative accounting: A critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions

Matthew Brander, Michael Gillenwater, Francisco Ascui

Research output: Contribution to journalArticlepeer-review

Abstract

Electricity generation accounts for approximately 25% of global greenhouse gas (GHG) emissions, with more than two-thirds of this electricity consumed by commercial or industrial users. To reduce electricity consumption-related emissions effectively at the level of individual firms, it is essential that they are measured accurately and that decision-relevant information is provided to managers, consumers, regulators and investors. However, an emergent GHG accounting method for corporate electricity consumption (the ‘market-based’ method) fails to meet these criteria and therefore is likely to lead to a misallocation of climate change mitigation efforts. We identify two interrelated problems with the market-based method: 1. purchasing contractual emission factors is very unlikely to increase the amount of renewable electricity generation; and 2. the method fails to provide accurate or relevant information in GHG reports. We also identify reasons why the method has nonetheless been accepted by many stakeholders, and provide recommendations for the revision of international standards for GHG accounting. The case is important given the magnitude of emissions attributable to commercial/industrial electricity consumption, and it also provides broader lessons for other forms of GHG accounting.
Original languageEnglish
Pages (from-to)29-33
JournalEnergy Policy
Volume112
Early online date9 Oct 2017
DOIs
Publication statusPublished - Jan 2018

Keywords

  • electricity emissions
  • Scope 2
  • renewable energy certificates (RECs)
  • GHG accounting
  • contractual emission factors
  • market-based method

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