This communication provides an interim update on the treatment of biomethane certificates under the GHG Protocol. It explains the history of considering this issue under the GHG Protocol and explains a process to consider the use of biomethane certificates in the future. In the meantime, there is no definitive guidance on this question under the GHG Protocol.
In the absence of guidance, companies purchasing certificates may wish to consult with their auditors and consider rules provided by relevant target-setting programs or applicable regulatory schemes in their jurisdiction(s) on how to report these purchases in their reports, while ensuring full transparency and following all GHG accounting and reporting principles.
Background: What is Biomethane?
Biomethane (also known as renewable natural gas or RNG) is a form of biogenic gas that has been treated to be used interchangeably with fossil-derived natural gas. Biomethane can be produced from biogas captured from degradation within a variety of systems, including manure lagoons, landfills, anaerobic digesters, or wastewater. Each pathway has unique lifecycle emissions, depending on the specific source and lifecycle of the fuel. Lifecycle emission sources can include upstream land impacts, processing, transportation/distribution, and combustion.
Energy users generally receive gas from a common carrier pipeline rather than a dedicated pipeline. Common carrier pipelines can contain a mix of biogenic and fossil gas. In some markets, contractual instruments have been introduced as a means for customers sourcing gas from common carrier pipelines to claim attributes from a differentiated source, e.g. biomethane.
History of Considering Biomethane Certificates Under the GHG Protocol
Scope 2 Guidance (2015)
The Scope 2 Guidance introduced a methodology for accounting for scope 2 emissions from purchased electricity, steam, heating, or cooling (“purchased energy”) using two methods:
- A location-based method reflects the average emissions intensity of grids on which energy consumption occurs (using mostly grid-average emission factor data).
- A market-based method reflects emissions from electricity that companies have purposefully chosen (or their lack of choice). It derives emission factors from contractual instruments, which include any type of contract between two parties for the sale and purchase of energy bundled with attributes about the energy generation, or for unbundled attribute claims.
Companies with any operations consuming purchased energy in markets providing product or supplier-specific data in the form of contractual instruments are required to report scope 2 emissions according to both the location-based method and the market-based method (i.e., “dual reporting”). The Scope 2 Guidance defines specific requirements for market-based accounting of purchased energy such as meeting several quality criteria for contractual instruments and the use of residual emission factors. The original publication of the Scope 2 Guidance (2015) included the following section on scope 1 emissions from purchased and consumed gas in Appendix A on Accounting for Steam, Heat, and Cooling:
“Like electricity, gas may be transmitted and distributed through a shared pipeline. Wherever it is used—either combusted in a boiler/heater or used as an input in a fuel cell—the emissions released from its consumption become the scope 1 emissions of the owner/operator of the equipment. Gas grids are regulated and managed closely by contracts between generators, suppliers, and consumers. In the U.S., the Federal Energy Regulatory Commission (FERC) also supports this by legally requiring contracts for a specific gas source to be treated equivalently to a “direct delivery line” between that source and the ultimate consumer. Almost all gas used today is natural gas with a standard emission factor, but increasingly biogas from landfills or other waste facilities is being injected into gas grids.
If a company has a contractual instrument specifying its gas supply as “biogas” or “biogenic,” the company should report using the market-based method and refer to the Scope 2 Quality Criteria to evaluate whether its gas use should be reported as scope 1 natural gas using a standard emission factor, or as biogenic CO2 emissions reported separately from the scopes. This evaluation requires some interpretation, since the Scope 2 Quality Criteria are specific to electricity and their guidance must be translated for use with gas. For instance, criterion 1 in relation to GHG emission rate claims should be also interpreted to include the emission rate specific to the biogenic fuel origin. The CO2 emissions will be influenced by the heat rate / Efficiency of the equipment used to consume the gas.
Companies would not need to provide a “dual report” in scope 1 based on average gas fuel blends in their region (location-based), due to: the limited types of fuel input (natural gas or biogas); the prevalence and regulatory support of contractual purchasing; and the less-complex dynamics of pipeline infrastructure, which does not present the same complexity of electricity infrastructure (e.g., no need to balance supply and demand throughout the day).”
This section was removed from the Scope 2 Guidance in 2020 because it was out of scope for the Scope 2 Guidance, which was intended to address scope 2 accounting only, rather than amending scope 1 accounting as defined in the GHG Protocol Corporate Standard.
Land Sector and Removals Guidance (2020-2024)
The topic was then considered as part of the Land Sector and Removals Guidance and a draft approach was included in Annex B: Biomethane of the Draft for Pilot Testing and Review (September 2022). The draft annex included guidance that companies sourcing gas from a common carrier pipeline should report combustion emissions based on the grid-average mix of fossil and biogenic natural gas from the common carrier pipeline, and that purchases or trades of certificates or credits should not be used to adjust the associated scope 1 emissions.
Stakeholder feedback from the Technical Working Groups, Review Group, and Pilot Testers suggested that the topic should be considered further before proceeding with the guidance that was proposed in the annex. Simultaneously, market-based accounting approaches have been proposed for a variety of other commodities, markets, and end-uses, not only biomethane. Consideration of extending the scope 2 market-based method to other sectors or end uses requires a broader process to determine whether it is appropriate for other sectors, and if so what rules and procedures are needed for other sectors. At the same time, there has been mixed feedback on the use of the market-based method in scope 2, including criticisms about its efficacy and appropriateness. This criticism has included calls for additional criteria or requirements, such as additionality, causality, or assessments to demonstrate impact, among other proposals.
In order to allow for a full exploration of these options and issues, Annex B on biomethane will be removed from the Land Sector and Removals Guidance and will not appear in the final publication.
Next steps: process to consider market-based accounting approaches
The GHG Protocol is undertaking a process to determine the need and scope for updates or additional guidance building on the existing set of corporate GHG accounting and reporting standards for scope 1, scope 2, and scope 3 emissions. As part of the future process, the GHG Protocol along with its governance bodies and partners plans to holistically examine the appropriateness of market-based accounting approaches in GHG inventories and/or GHG targets across sectors, end-uses, and scopes.
As a first step, interested stakeholders were invited to provide feedback on the current suite of corporate standards and guidance and provide suggestions for either maintaining current practices or developing updates and new additional guidance. This feedback was collected via four surveys conducted between November 2022 and March 2023, including one on market-based accounting approaches. The feedback from these surveys will inform the scope of work for future updates to the GHG Protocol, including a holistic examination of the appropriateness of market-based accounting approaches in GHG inventories and/or GHG targets across sectors, end-uses, and scopes.
Accounting for and Reporting on Biomethane
Accounting for and reporting on biomethane combustion
The approach discussed above for biomethane certificates is related to whether companies can claim the environmental attributes of biomethane for gas that is sourced from common carrier pipelines. Regardless of the treatment of certificates, companies that are reporting emissions associated with the combustion of biomethane or other forms of bioenergy in line with the GHG Protocol should report:
- Biogenic CO2 emissions from stationary or mobile combustion of bioenergy, calculated using CO2 combustion emission factors by fuel/gas type (for example those provided on the GHG Protocol website at https://ghgprotocol.org/calculation-tools-and-guidance).
- Scope 1, scope 2, or scope 3 methane (CH4) and nitrous oxide (N2O) emissions from stationary or mobile combustion of bioenergy (using CH4 and N2O combustion emission factors by fuel/gas type).
- Scope 3, category 3 emissions (Fuel- and energy-related activities, not included in scope 1 or scope 2). This includes all upstream (cradle-to-gate) emissions of purchased bioenergy, from raw material extraction up to the point of (but excluding) combustion.
- Any other scope 1, scope 2, or scope 3 emissions, if applicable.
Companies should refer to the Land Sector and Removals Guidance (final publication expected in 2024) for further guidance on accounting for biogenic emissions and associated land impacts.
Accounting for emissions impacts relative to counterfactual scenarios
Biomethane can have positive climate impacts, primarily through the avoidance of methane emissions at the source (e.g. manure lagoons, landfills, etc.). The avoidance or displacement of emissions that would have otherwise occurred is classified as an avoided emission and is calculated using a project or intervention accounting method (quantified relative to a counterfactual baseline scenario), rather than an inventory accounting method. Companies may quantify and report avoided emissions separately from the scopes using project or intervention accounting methods.
For additional guidance on avoided emissions, see:
- GHG Protocol, Scope 3 Standard, section 9.5, including box 9.4 (https://ghgprotocol.org/standards/scope-3-standard)
- GHG Protocol, Scope 2 Guidance, section 6.9 (https://ghgprotocol.org/scope-2-guidance)
- WRI, 2018. “Estimating and Reporting the Comparative Emissions Impacts of Products” (https://ghgprotocol.org/estimating-and-reporting-avoided-emissions)
- GHG Protocol Project Protocol (for quantifying GHG impacts of project-scale actions) (https://ghgprotocol.org/standards/project-protocol)
- GHG Protocol Policy and Action Standard (for quantifying GHG impacts of actions at larger scales) (https://ghgprotocol.org/policy-and-action-standard)
Relationship with carbon intensity metric
Some programs for evaluating, verifying, and regulating the carbon content of fuels use carbon intensity (CI) as a metric (or “score”) for evaluating the climate impacts of fuels such as biogas, biomethane, and other fuels. Carbon intensity includes aggregated life cycle emissions (direct and indirect) associated with the use of a fuel and is often presented in comparison to another fuel or scenario using elements of project accounting relative to counterfactual scenarios (e.g., to quantify avoided impacts). CI should therefore not be used as a direct replacement for an emission factor in inventory accounting, unless it is disaggregated into individual inventory accounting categories (e.g., by scope and category) and excludes any project accounting elements, which may be reported separately but not within the scopes.