January 31, 2023
More companies than ever are purchasing renewable energy credits to neutralize their carbon dioxide emissions and meet growing social pressure to “go green."

More companies than ever are purchasing renewable energy credits to neutralize their carbon dioxide emissions and meet growing social pressure to “go green.”

A new study, however, found that these claims are often exaggerated and risk undermining corporate mitigation targets established under the 2015 Paris climate accord.

The study published Thursday in the journal Nature found a disconnect between the companies that are purchasing the renewable energy credits to shrink their carbon footprints and the ones that are actually powering their companies with 100% renewable energy.

Under current Scope 2 emission reporting guidelines, the authors explain, companies can purchase credits to neutralize their carbon dioxide emissions, allowing them to then claim zero emissions for each unit of consumption covered by purchased credits, regardless of the actual emissions produced by the electric grid.

But it also paints a false picture of progress in reducing carbon emissions, according to researchers, who examined disclosure data from 115 companies.

When including credits, researchers found that companies dropped their carbon emissions by 31% between the years of 2015 and 2019. But without using the credits, the combined reduction was much smaller— just 10%.

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If this trend continues, the study found, 42% of pledged Scope 2 emission cuts will not reflect real-world mitigation.

“The widespread use of RECs raises doubt on companies’ apparent historic Paris-aligned emissions reductions, as it allows companies to report emission reductions that are not real,” the authors wrote.

“Moreover, a continuation of recent trends would mean that nearly half of future scope 2 emission reductions reported by companies with [science-based targets], would not be real.”

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In order to meet these science-based targets, researchers conclude, current guidelines must be changed to require companies to report “only real emission reductions” as progress toward meeting the science-based targets.

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