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1 + 1 = 3, Carbon Can’t Count [Carbon 101 Series] 

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Carbon Accounting for Environmental Certificates 

Your company has announced with great fanfare 50% emissions reductions by 2030.  Everyone’s very excited!!! Except you, you’re the Sustainability and Environment Manager, they just told you and it’s your job – how are you going to make it happen?…   

One of the big pieces of the puzzle is Environmental Certificates and accounting for these under the various Carbon accounting regimes. We take a look at everything you need to know so you are prepared for what’s to come. 

The Journey to Net Zero 

The journey to carbon emission reductions (and eventually neutrality) involves several key steps: 

To learn more about the steps see our “Net-Zero Webinar: Decoding the Buzzwords and Practical Sector-Specific Advice”.  For any terms in this article, you may want to reference Northmore Gordon’s Glossary 

Emissions Offsetting using Environmental Certificates 

Offsetting means taking steps to offset existing emissions from the business with abatement (emissions reductions from another source), one way to do this is by purchasing and surrendering Environmental Certificates. There are several distinct types of certificates, and not all can be used for offsetting.  

Environment Certificates 

Renewable Energy        CO2 Emissions Reductions            Electricity & Gas Efficiency 

Put simply Environmental Certificates are a mechanism to measure the quantity and then decouple the environmental component (value) from a project or resource.  The environmental value can then be traded and used to generate income or to meet other objectives such as offsetting emissions. 

For example, a biogas boiler that generates 500 MWh of renewable electricity could register approximately 500 Renewable Energy Certificates (LGCs). The owner can sell the 500 MWh of electricity (via the grid) and separately sell the 500 LGCs (the renewable component) to receive additional income. 

The three main types of certificates for Energy and Carbon are as follows: 

Putting it all together. Environmental Certificates and Offsets 

It’s important to understand that by selling the certificate, then the environmental component (renewable energy, carbon abatement, or energy efficiency) can no longer be claimed by the consumer of the physical resource or implementer of the project. 

The flipside of this is that an existing project that consumes grid energy or generates emissions can “made” renewable or carbon neutralThe act of offsetting all scope 1, 2 and 3 emissions associated with a product or service. by purchasing (and surrendering) the equal number of certificates as the amount of energy consumed or the amount of carbon emitted. 

Looking at the Accounting for each of the Australian certificate types: 

Voluntarily surrendering a certificate from a company’s account in a government registry means that the certificate has been taken out of circulation and this is done to claim the environmental value and hence reduce emissions by offsetting. 

Energy Saving Certificates (White Certificates)?

Energy efficiency projects that generate energy saving certificates, these certificates are treated as a financial incentive for typically awarding 10 years of savings to help overcome CAPEX barriers and to reduce demands from the network. This is particularly beneficially for VEECs generated in Victorian by energy savings activities from the grid reductions of renewable energy generation. EG Solar VEECs, and VEECS from Biomass, Biogas, and Cogeneration.  In all these cases the business has reduced their energy consumed and can sell the environmental certificates and sell them whilst still achieving the carbon reduction or renewable energy benefits.  Some agencies are reviewing this space, so make sure you contact Northmore Gordon to learn the latest. 

Standards for Carbon Neutrality 

To legitimately claim to achieve a certain level of carbon reductions, a business needs to be certified against one of the recognized standards. In Australia these include: 

Climate Active Carbon Neutral Standard (formerly the National Carbon Offset Standard, NCOS). Climate Active is an ongoing partnership between the Australian Government and Australian businesses to drive voluntary climate action. The brand represents Australia’s collective effort to measure, reduce, and offset carbon emissions to lessen our negative impact on the environment  

Science Based Targets Initiative (SBTiScience Based Targets initiative) Is an international initiative that drives ambitious climate action in the private sector by enabling companies to set science-based emissions reduction targets.  SBTi’s Corporate Net-Zero Standard is the world’s first framework for corporate net-zero target setting in line with climate science. SBTi is different from Climate Active in the that it does not allow offsetting in the same way.

Corporate Emissions Reduction Transparency (CERT) In February 2021 the Australian Clean Energy RegulatorThe Clean Energy Regulator is the Australia Government body responsible for accelerating carbon abatement for Australia through the administration of the National Greenhouse and Energy Reporting scheme, Renewable Energy Target and the Emissions Reduction Fund. More (CER) announced the CERT initiative which is underpinned by the National Greenhouse and Energy Reporting (NGERNational Greenhouse and Energy Reporting Scheme. Large energy users and greenhouse gas emitters that exceed the thresholds must report their detailed energy and emissions data each year to the Australian Clean Energy Regulator. More) scheme and available for large companies to demonstrate their action on climate change. Going live in January 2022 this new scheme is in a pilot phase and provides a supplementary reporting scheme to allow NGER reporting companies to voluntarily disclose their purchases of offset units and supplies of renewable energy.  The CERT guidelines specify which Environmental Certificates are eligible units for reducing Scope 1 and 2 emissions and in what circumstances.  NG can help navigate this new opportunity. 

Talk to Northmore Gordon today about your journey to carbon neutrality. 

You may also like:

Key Considerations for Companies When Purchasing Carbon Offsets
Key Purchasing Considerations for Renewable Energy anywhere in the world using RECs
What Are Scope 1, 2 & 3 Emissions And How Can You Manage Them [Carbon 101 Series]

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What is the article 'Carbon Accounting for Environmental Certificates' about?

The article, part of Northmore Gordon's Carbon 101 Series and titled '1 + 1 = 3, Carbon Can't Count,' explains the journey to net-zero emission reductions, focusing on Environmental Certificates and how they are accounted for under various carbon accounting regimes, so businesses are prepared to meet emissions reduction targets.

What are the key steps in the journey to net-zero according to the article?

The steps are: establish a baseline through audits and emissions accounting across Scope 1, 2, and 3 boundaries; engage stakeholders and set targets; identify risks, opportunities, and business cases; build a roadmap for energy and carbon performance (including energy efficiency, heat recovery and direct emissions reductions, onsite and grid-purchased renewables, and lastly offsets/environmental certificates for the hardest reductions); and then implement and iterate.

What is emissions offsetting using environmental certificates?

Offsetting means taking steps to offset existing emissions from a business with abatement (emissions reductions from another source), often done by purchasing and surrendering Environmental Certificates. There are several distinct types of certificates, and not all of them can be used for offsetting.

What are the three main types of certificates for Energy and Carbon mentioned in the article?

The three main types are: Renewable Energy Certificates (representing 1 MWh of renewable energy generated, e.g. RECs, I-RECs, GOs, TIGRs, LGCs, ZNECs, J-Credits); Carbon Credits (representing 1 tonne of CO2-e abated, e.g. Australian Carbon Credit Units/ACCUs, Verified Emissions Reductions/VER, Certified Emissions Reductions/CER); and Energy Savings Certificates (typically representing 1 MWh of electricity or gas saved, also known as White Certificates, e.g. NSW Energy Saving Certificates and VIC Energy Efficiency Certificates).

What is the difference between LGCs and STCs?

Large-scale Generation Certificates (LGCs) are registered after measuring actual electricity generation and can be surrendered to offset grid-based energy use, letting a business claim to be using renewable energy. Small-scale Technology Certificates (STCs) are deemed (calculated) based on expected generation through to 2030, determined by the installation's postcode and system size; unlike LGCs, STCs cannot be used to offset energy bought from the grid, though under the Climate Active Standard they can be sold to help with system costs while the energy consumer still claims the renewable energy.

Can Energy Saving Certificates (ESCs/VEECs) be used to offset grid emissions?

No. Energy Saving Certificates (ESCs, VEECs) are neither renewable energy nor carbon credits, so they cannot be used to offset energy consumed from the grid or emissions from operations. However, selling these certificates for income does not currently undermine the emissions reduction benefits of the underlying energy efficiency project, though some accreditation agencies are reviewing this.

How can Australian Carbon Credit Units (ACCUs) be used for offsetting?

ACCUs and other recognized international credits can be purchased and surrendered to offset emissions. For example, if a business emits 500 tonnes of CO2-e per year, it could purchase and surrender 500 ACCUs annually to claim carbon neutrality, such as for Scope 1 emissions.

What happens when a certificate is sold versus surrendered?

By selling a certificate, the environmental component (renewable energy, carbon abatement, or energy efficiency) can no longer be claimed by the consumer of the physical resource or the project implementer. Conversely, an existing project that consumes grid energy or generates emissions can be made renewable or carbon neutral by purchasing and surrendering an equal number of certificates to the energy consumed or carbon emitted. Voluntarily surrendering a certificate in a government registry takes it out of circulation, allowing the claimant to reduce emissions by offsetting.

What standards for carbon neutrality are recognized in Australia according to the article?

The article lists three: the Climate Active Carbon Neutral Standard (formerly the National Carbon Offset Standard, NCOS), a partnership between the Australian Government and businesses for measuring, reducing and offsetting emissions; the Science Based Targets Initiative (SBTi), an international initiative for science-based emissions reduction targets that does not allow offsetting in the same way as Climate Active; and the Corporate Emissions Reduction Transparency (CERT) scheme, announced by the Australian Clean Energy Regulator in February 2021, underpinned by the National Greenhouse and Energy Reporting (NGER) scheme, allowing large companies to voluntarily disclose purchases of offset units and renewable energy supplies.

Who wrote the article and what is their background?

The article is attributed to Northmore Gordon, authored by Craig, a mechanical engineer with 30 years of experience, including more than fifteen years assisting organisations manage energy, greenhouse gas emissions, and climate change impacts—covering seven years focused on energy management and greenhouse gas inventory development/mitigation, and six years on renewable energy generation systems.

What is a biogas boiler example used to illustrate environmental certificates?

The article gives the example of a biogas boiler that generates 500 MWh of renewable electricity, which could register approximately 500 Renewable Energy Certificates (LGCs). The owner can sell the 500 MWh of electricity via the grid and separately sell the 500 LGCs (the renewable component) to receive additional income.

According to the knowledge-base context, what should a boundary statement in carbon accounting document?

A boundary statement should document the entities or activities included in the assessment, the reporting period being measured, the framework being applied, the data sources used, and any exclusions from the boundary.

What should a 'claim file' retain when making an environmental claim, per the supporting context?

A claim file should retain the exact wording of the claim, supporting calculations, source documents and the measurement period, assumptions made, and the approver's name.

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