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Renewable energy certificates threaten the integrity of corporate science-based targets

Nature Climate Change volume 12, pages 539–546 (2022)Cite this article

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Abstract

Current greenhouse gas accounting standards allow companies to use renewable energy certificates (RECs) to report reductions in emissions from purchased electricity (scope 2) as progress towards meeting their science-based targets. However, previous analyses suggest that corporate REC purchases are unlikely to lead to additional renewable energy production. Here we show that the widespread use of RECs by companies with science-based targets has led to an inflated estimate of the effectiveness of mitigation efforts. When removing the emission reductions claimed through RECs, companies’ combined 2015–2019 scope 2 emission trajectories are no longer aligned with the 1.5 °C goal, and only barely with the well below 2 °C goal of the Paris Agreement. If this trend continues, 42% of committed scope 2 emission reductions will not result in real-world mitigation. Our findings suggest a need to revise accounting guidelines to require companies to report only real emission reductions as progress towards meeting their science-based targets.

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Fig. 1: Combined scope 2 emissions of sample companies and the factors contributing to their reductions since 2015.
Fig. 2: Share of sample companies whose 2015–2019 scope 2 emission trajectories aligned with temperature goals for three emission accounting approaches.
Fig. 3: Annual future emission reductions based on the SBTs of the sample companies.
Fig. 4: Estimated cumulative scope 2 emission reduction from base to target year on the basis of the sample companies’ SBTs and the estimated role of RECs in achieving these reductions.

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Data availability

This study is based on preexisting datasets, primarily references7,37,40. The data behind all figures are available in the Supplementary Spreadsheet.

Code availability

No custom code was developed for this study. All equations are given in Methods and we used Microsoft Excel for the analysis.

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Acknowledgements

We are very thankful for the valuable feedback of the three anonymous reviewers. This research was funded by the Natural Sciences and Engineering Research Council of Canada (NSERC) Discovery Grants Program (grant no. RGPIN/6956-2017 to S.L. and RGPIN-2017-04159 to H.D.M.), Concordia University Research Chair funding (H.D.M.) and the Concordia University Horizon Fellows Program (A.B.).

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Authors and Affiliations

  1. Department of Management, John Molson School of Business, Concordia University, Montréal, Quebec, Canada

    Anders Bjørn & Shannon M. Lloyd

  2. Department of Geography, Planning and Environment, Concordia University, Montréal, Quebec, Canada

    Anders Bjørn & H. Damon Matthews

  3. Loyola Sustainability Research Centre, Concordia University, Montréal, Quebec, Canada

    Anders Bjørn, Shannon M. Lloyd & H. Damon Matthews

  4. Centre for Business, Climate Change and Sustainability, University of Edinburgh Business School, Edinburgh, UK

    Matthew Brander

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  1. Anders Bjørn
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  2. Shannon M. Lloyd
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Contributions

A.B. conceived the study idea. A.B. developed the study design with contributions from M.B., S.L. and H.D.M. M.B. synthesized the literature on market-based scope 2 emission accounting. A.B. performed the data analysis and produced the figures with contributions from S.L. H.D.M. assisted with framing the manuscript. A.B. drafted the manuscript with contributions from H.D.M., S.L. and M.B. All authors contributed to manuscript editing and revisions.

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Correspondence to Anders Bjørn.

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The authors declare no competing interests.

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Nature Climate Change thanks Jing Meng and the other, anonymous, reviewer(s) for their contribution to the peer review of this work.

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Supplementary information

Supplementary Information

Supplementary Methods, Figs. 1–13, and Tables 1 and 2.

Supplementary Data 1

The numerical data visualized in Figs. 1–4 and in higher granularity.

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Bjørn, A., Lloyd, S.M., Brander, M. et al. Renewable energy certificates threaten the integrity of corporate science-based targets. Nat. Clim. Chang. 12, 539–546 (2022). https://doi.org/10.1038/s41558-022-01379-5

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