Research

Firms inflate green energy claims, study finds

Widespread use of renewable energy certificates – bought by companies to underscore their green credentials – is masking corporate inaction on carbon emissions, research suggests.

NetZero

The certificates – often used by large polluters to show they use renewably-generated electricity – leads to inflated claims of global climate goals being met, the study claims.

Researchers say the scheme’s popularity is undermining efforts aimed at encouraging companies to reduce their reported emissions by setting clear science-based targets (SBTs).

Certificates allow some firms to announce reductions three times higher than they could otherwise declare, says the team from the University of Edinburgh Business School and Concordia University, Montreal.

Paris Agreement

Many firms have set SBTs in accordance with the 2015 Paris Agreement, which aims to keep temperature rise less than 1.5 degrees Celsius above pre-industrial levels by 2050.

Renewable energy certificates (RECs) play a key role in helping large polluting companies meet their targets – each REC certifies that its holder has one megawatt-hour of electricity from renewable energy sources. 

Under current emissions accounting standards, companies can report zero emissions for every megawatt-hour of consumed electricity that they match with a purchased REC. 

Evidence suggests, however, that the purchase of such certificates is unlikely to increase renewable energy production.

Exaggerated roles

The new study argues that, since renewable energy certificates generally do not reduce emissions, companies using them are exaggerating their role in mitigating climate change. 

A calculation by the researchers shows that a sample of 115 companies reported a 31 per cent reduction in emissions between 2015 and 2019.

Closer analysis reveals, however, that if the purchase of inefficient certificates are omitted, the actual drop in emissions is about 10 per cent.

“The fact that companies can use these certificates to pretend they are following a most ambitious reduction plan when their reduction is, in fact, much less is a serious problem," says lead author Anders Bjørn, of Concordia University.

Inflated claims

If this use of certificates to exaggerate emission reductions continues, researchers estimate that companies will be able to show a 7.2 per cent annual reduction in emissions – even though their real decline is only 3.6 per cent. 

Such levels of reduction fall short of Paris Agreement targets, the team says.

Researchers used data from the Carbon Disclosure Project – a non-profit organisation that maintains a disclosure system used by companies, investors and governments around the world. 

The CDP is a database of corporate action on climate change. Companies provide their data on estimated emissions, electricity consumption, heating, steaming and cooling, as well as the purchase of renewable energy certificates.

Serious flaws

The researchers say current methods of accounting for carbon emissions have serious flaws and they are calling for a change in accounting standards.

“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,” says Matthew Brander, of the University of Edinburgh Business School.

The study, published in in Nature Climate Change journal, was funded by the Natural Sciences and Engineering Research Council of Canada and Concordia University.

Related links

University of Edinburgh Business School

Carbon Disclosure Project