New guidance published by CRS’s Clean Energy Accounting Project (CEAP) fills a critical gap in greenhouse gas (GHG) emissions accounting rules by providing a framework for companies to make credible direct emissions and clean fuel use claims backed by certificates for bio-based and low-carbon fuels. Market-based Accounting for Clean Fuels was designed to be consistent with the current version of the GHG Protocol Corporate Standard and with criteria for market-based accounting found in the GHG Protocol’s supplemental Scope 2 Guidance. While CEAP’s new guidance recommends minimum criteria that clean fuels certificates must meet to support credible use claims and emissions reporting, the guidance can be used as a foundation for developing quality standards for purchased fuels and to help unlock pent-up customer demand for clean, low-carbon alternatives to conventional fossil fuels.
Critical hard-to-abate sectors are depending on clean fuels to achieve their emissions-reduction targets, but uncertainty about the use of fuel certificates for GHG accounting has limited voluntary demand for clean fuel procurement. The GHG Protocol currently recommends companies “consult with their auditors and consider rules provided by relevant target-setting or applicable regulatory schemes in their jurisdiction(s)”—and further updates are not expected until 2028.
Suppliers of bio-based and low-carbon fuels are anxious to scale up production and are relying on market-based accounting to drive wider investment in the development of production facilities and distribution networks, including expanding the use of common carrier pipelines and other shared fuel distribution systems.
To address the lack of guidance, CRS convened a group of diverse stakeholders—including fuel suppliers, purchasers, certificate tracking organizations, and environmental nonprofits—under a CEAP initiative charged with reaching consensus on a set of global quality criteria necessary for clean fuel certificates to support credible use claims and reporting of direct emissions.
Markets for similar contractual instruments for renewable electricity (known as Renewable Energy Certificates (RECs) in the U.S. and Energy Attribute Certificates (EACs) more broadly) have operated successfully for decades. Applying these certificates to emissions reporting is known as market-based accounting.
Market-based accounting recognizes that certificates that track the environmental attributes of clean energy separately from the energy itself are necessary where energy must be delivered through shared distribution networks that mix different types of energy and energy from different sources. However, this mixing makes it practically impossible to track any given unit of energy from where it is generated to where it is consumed. Under these circumstances, contractual instruments—like clean fuels certificates—are the most precise method for tracking energy and accurately accounting for clean energy transactions.
Using certificates to account for the attributes of clean energy also opens new opportunities to encourage investment in the production of emerging alternative fuels, while increasing the transparency of fuel transactions and expanding equitable access to clean fuels markets.
The CEAP guidance adapted the quality criteria presented in the GHG Protocol Scope 2 Guidance, which was designed for RECs, to serve a similar function for clean fuel certificates. Where these criteria are met, certificates can be used to properly convey production attributes, protect against double counting, and permit companies to more accurately calculate and report their direct emissions.
Criteria for fuels certificates must address several challenges that are not relevant for tracking the environmental attributes of renewable electricity.
Differences Between Clean Electricity and Clean Fuels Markets that Impact Market-based Emissions Accounting
| Clean Electricity | Clean Fuels |
|---|---|
| Distribution Networks: | |
|
Most electricity generation is distributed via bulk power grids, where charge travels at the speed of light and there is no practical way to physically trace electricity that is input to the grid to power that is drawn by any given consumer connected to it. |
While some clean fuels are delivered through common carrier pipelines, many depend instead on multiple modes of transport, including dedicated delivery systems where it is easy to identify both where the fuel was produced and who ultimately consumed it. If it is possible to assert a competing chain-of-custody backed by physical evidence, use claims based on certificates become vulnerable to greenwashing accusations. |
| Emissions: | |
|
Electricity produces GHG emissions when it is generated, but not when it is consumed. |
Clean fuels generate emissions both when they are produced and when they are used, and often significant emissions even while they are transported. Quality criteria must account for how attributes of a fuel’s production as well as its consumption and distribution are conveyed through certificates claiming to represent those attributes. |
| Storage: | |
|
Electricity generally cannot be stored in large amounts or for long periods. |
Fuels can be stored in massive volumes almost indefinitely without significant deterioration, which could permit use claims made today based on attributes of fuels that may not be consumed for decades. |
| Co-Products: | |
|
Generation of electricity rarely produces anything more than heat as a co-product. |
Fuel production processes are complex and often involve feedstocks that are fuels themselves, as well as the production of co-products, by-products, and derivatives, all of which may contribute or consume certain input attributes as they progress through a fuel’s production pathway. |
Market-based Accounting for Clean Fuels addresses each of these issues, as well as the conditions under which fuel that is injected into a shared distribution system in one area can be withdrawn from a shared distribution system in another. The guidance also examines the extent to which a single certificate may apply to multiple fuel types, and how to characterize fuel whose attributes have been stripped from it and sold separately.
Companies that procure clean fuel certificates that adhere to the quality criteria presented in the guidance help protect their claims to the use of clean fuels from greenwashing accusations, enhance the accuracy of their reported emissions inventories, and ensure that asserted emissions reductions are supported by contractual instruments whose quality is recognized by a consensus of clean energy stakeholders.