Changes in Scope 2 accounting

Any company that calculates its carbon footprint cannot ignore Scope 2. Scope 2 covers indirect emissions from electricity consumption—that is, the electricity a company purchases but does not generate itself.

How this electricity is accounted for in carbon footprint calculations has been a subject of debate for years. The GHG Protocol, the world’s most widely used standard for greenhouse gas accounting, is currently revising its Scope 2 rules. The central question is: How credible is the evidence that a company is actually purchasing green electricity?

To address this, the GHG Protocol conducted a public consultation. Nearly 1,100 responses were received from 56 countries. The results show that the proposed changes are controversial.

What are these proposals?

Today, companies can demonstrate their use of green electricity through certificates—known as Energy Attribute Certificates (EACs). These certificates verify the origin, quantity, and generation method of the electricity and are issued by renewable energy producers. Currently, EACs must be issued in the same year as the electricity is consumed. The GHG Protocol aims to tighten these requirements:

• Hourly Matching: In the future, certificates will be issued not only in the same year but also in the same hour as the consumption. This is intended to make the green energy certificate more precise in terms of timing and thus more credible.

• Deliverability: Certificates will only be recognized from regions from which electricity can be physically delivered. The goal is to establish a closer geographical link between generation and consumption.

• Transitional Provisions: For existing contracts, the GHG Protocol proposes two alternatives. The Legacy Clause allows ongoing certificate contracts to continue for a transitional period, even if they do not yet meet the new requirements. This protects companies that have already entered into long-term contracts. The Uniform Effective Date, on the other hand, establishes a common effective date. As of that date, the new rules will apply to all companies at the same time, with no exceptions for existing contracts.

A lot of resistance, but also support

Of the 909 respondents, 70 percent oppose mandatory hourly matching or offer little support for it. Only 22 percent are in favor, while 7 percent are neutral. Skepticism is particularly pronounced among companies: 82 percent of the 429 responses from companies show little or no support.

The deliverability requirement is also not well received. 59 percent of 875 respondents reject it or offer little support for it. 30 percent support it, while 11 percent are neutral. The criticism is specific: higher costs and administrative burdens, a lack of market infrastructure in certain regions, potential declines in voluntary green power procurement, and restrictions on long-term power purchase agreements (PPAs).

The picture is clearer when it comes to the transitional provisions. The legacy clause receives strong support, with 90 percent of 801 respondents in favor. Only 46 respondents prefer the uniform effective date.

What happens next?

Feedback from the consultation will be incorporated directly into the next revision phase. The GHG Protocol’s Technical Working Group (TWG) and Independent Standards Board (ISB) will evaluate the feedback and, based on that, decide which of the proposed changes will be included in the revised standard.
You can find the complete analysis of the feedback here: GHG Protocol – Summary of Feedback (PDF)

Do you have questions about Scope 2 accounting at your company? Please contact us.