Double Counting in Environmental Commodities
What is “Double Counting”?
"Double counting" is a scenario in which the environmental attributes associated with a single unit of renewable energy generation or carbon credit is claimed or tallied multiple times. This issue typically arises when two or more parties aim to assert the environmental merits of the same renewable energy or a carbon credit unit. It can manifest at various stages, including the issuance, trading, or claiming of environmental commodities like EACs and carbon credits.
In the realm of renewable electricity, double counting emerges when the identical megawatt-hour (MWh) of renewable power is accounted for through multiple avenues. For instance, if a generator is registered in more than one EAC registry, it results in the renewable electricity being duplicated in the count.
Within the context of carbon offsetting, double counting becomes evident when a carbon credit is claimed by multiple entities. This concern is particularly problematic in international carbon trading between countries, as it often leads to both the purchasing and selling nations incorporating the same emissions into their calculations, thereby distorting the accuracy of carbon accounting.
Double counting may occur under the following circumstances:
- An environmental attribute or a carbon credit is issued multiple times.
- An environmental attribute or a carbon credit is registered in two or more different registries.
- An environmental attribute or a carbon credit is duplicated within a registry and can be sold and used more than once.
- A facility claims to be using renewable electricity, while simultaneously, the system owner sells the EACs to a utility to fulfill its RPS (renewable portfolio standard) requirements.
Why is Double Counting a Problem?
Double counting, whether resulting from accidental errors or financial motivations, presents several critical issues.
- It can significantly exaggerate the perceived impact of renewable energy generation, leading to potential misconceptions among consumers, investors, and policymakers regarding the true extent of clean energy use.
- It undermines the integrity of renewable energy tracking systems and fosters a sense of mistrust between involved parties.
- It has the potential to disrupt the market for Energy Attribute Certificates (EACs) as the supply and demand for these certificates can fluctuate artificially, driven by double counting imbalances.
- It can introduce challenges in terms of legal and regulatory compliance. It may lead to inconsistencies in adherence to existing regulations, potentially necessitating government intervention to establish more rigorous oversight.
How to Avoid Double Counting?
In order to make a credible claim of environmental commodities consumption, the buyer must have an exclusive claim supported by an energy attributes tracking instrument such as EACs and Carbon Credits. The EACs and Carbon Credits must be retired in each certified registry to ensure that no other claims are generated on the same generation attributes.
EACs certified via each registry.
Carbon Credits are certified via a carbon credit registry (like Verra, Gold Standard, etc).
Buyers should
- Ensure that the environmental attributes are retired in their name or retired on their behalf by their supplier.
- Properly retire RECs before making a claim. Selling or transferring environmental attributes after making environmental claims leads to double counting.
- Clarify in the contract that the purchase conveys exclusive rights to the attributes and that the attributes are not also being used for an RPS or any other regulatory requirement.
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