Renewable energy certificates are misleading public on company emissions reductions

A study has identified significant discrepancies between claims that firms are aligning with climate targets and a reality of relative inaction. 

When the Paris Agreement was drawn up in 2015, it committed governments to a goal of limiting global warming to 2C above pre-industrial levels by 2050, or ideally 1.5C. Many companies have also adopted policies to fall in line with these aims, with the worst polluters purchasing renewable energy certificates for every megawatt hour of renewable electricity the own, allowing them to report zero emissions for that portion of their power use. 

However, research by Concordia University has identified a major problem with this system. Specifically, the fact that carbon energy certificates usually do not mean a reduction in emissions. This means many companies are over-stating their carbon mitigation claims, with one calculation of 115 firms, based on data taken between 2015 and 2019, showing that the reported 31% reduction was actually three-times higher than the actual figure of just 10%.

‘This means that the certificates allow these companies to report a reduction that is three times higher than what they would otherwise be able to report,’ said Anders Bjørn, a Horizon postdoc in the Department of Geography, Planning and Environment, and lead author of the study. ‘It’s hugely problematic that companies can use the RECs to claim that they are following this very ambitious reduction pathway when in fact they are actually reducing by much, much less.’

‘The findings also raise broader questions about relying on non-state actors, such as companies, to fill the ambition gap left by governments in meeting the Paris Agreement goals,’ said Matthew Brander, one of the paper’s other authors. The team are now calling for a change in accounting standards to stop large companies masking insufficient real emission reductions through the use of RECs. 

Continued use of renewable energy certificates to overstate reductions continues, on average companies reporting 7.2% reductions would actually only be achieving a 3.6% reduction – far more than is needed to meet the 1.5C target, and only just aligned with the 2C limit. These calculations are based on Carbon Disclosure Project data, a non-profit charity that maintains a global disclosure system used by companies, governments and investors. 

Earlier this month, the University of Washington published a report showing that when all pollutants are taken into account, the world’s remaining carbon budget – how much CO2 can be released into the atmosphere without exceeding the 1.5C target – is significantly smaller. Using this model, even if all man-made emissions stop by 2029 there is a two-in-three chance of temporarily failing to meet the global temperature goal. 

Image credit: Zbynek Burival