For the sake of simplicity, from among the proposals discussed in the GHG Protocol consultations I will focus on just one. The GHG Protocol proposes that in the future companies should calculate emissions related to purchased energy using data with hourly granularity. What does this mean? Today, it is sufficient to multiply the annual volume of energy purchased from a given supplier by the appropriate annual average emissions factor obtained from that supplier. This is an activity we perform once a year; sometimes we only need to do a bit of additional work on calculating the residual mix for a given supplier. Yet we all know that the sources from which energy is generated are constantly changing: at different times of the year and at different hours, a greater or smaller share of energy comes from renewable sources or from fossil fuels. In our own company, we also consume different amounts of energy at different times of the day and year. The most accurate approach would therefore be to calculate emissions on an hourly basis.
This is exactly what the GHG Protocol proposes: matching hourly energy consumption with emissions factors applicable in those specific hours. This would give us much more accurate data on our emissions. However, two problems arise:
- The calculations are more difficult. Obtaining data for the entire year is relatively easy, and the emissions value can even be calculated on a calculator, on a proverbial piece of paper, or even in one’s head (although then there would be no audit trail 😉). A year has 8,760 hours, so calculating emissions using the new, more precise method requires at least an appropriate Excel file and probably a more advanced system. Hourly energy consumption data cannot be read from an electricity bill either, so we need a system that automatically provides these data to us in real time.
- Lack of data on energy emissions factors at the hourly level. While data on electricity generation sources are available for the entire country (with granularity as fine as every 15 minutes, not just hourly), such data are not available for individual energy suppliers.
Why don’t individual energy suppliers provide such data? Because there is no such requirement in the law. Energy sellers are required to publish information on their fuel mix only once a year. Energy producers know their exact fuel mix used for electricity generation on an ongoing basis, but energy sellers often purchase electricity from various producers, either directly or through an exchange.
Until regulations change, the GHG Protocol’s proposal to calculate emissions with hourly granularity cannot be implemented. Does that mean the proposal is pointless? Quite the opposite! I believe it is very good, because it can initiate a change that, in a few years, may lead to greater transparency in the market.
Regulatory changes do not originate primarily in legislative proposals of the European Commission (which is almost the final stage), but many years earlier, in the work of academics and think tanks. It is there that concepts for change emerge and are tested in prototype form by individual companies. They then make their way into voluntary standards. If these gain growing support and become increasingly popular, the chances increase that they will eventually be incorporated into legislation. In the meantime, tools emerge that make it easier for companies to apply these standards.
The GHG Protocol’s proposal to base emissions calculations on hourly granularity data may, in a few years, lead to regulatory changes that will allow it to be applied in practice. This would enable companies to manage their energy consumption, and thus the emissions intensity of their operations, products, and services, much more precisely.
Changes in rules are associated with additional challenges as well, as they involve implementation costs and may lead to a data gap between companies reporting “the old way” and those reporting “the new way.” Is the cost of this gap too high for the market as a whole? That is already a topic for one of the future newsletters.
And if you would like to familiarize yourself with MATERIALITY’s opinion on the changes proposed by the GHG Protocol, I invite you to read our comment letter and our full response to the consultation questionnaire 😊
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