GHG Protocol Part 4: Regulation – A Global Policy Shift to Granularity for Clean Electrification

In previous blogs, we discussed the huge opportunity presented by the GHG Protocol update and what the research says about how to solve it with Granular Accounting.

Now we turn to what Governments are doing and how that should guide where the GHG Protocol goes.

Over the past few years, we have started to see governments set goals and regulations with Granular Accounting at their core, a critical recognition of the need for more accurate accounting and clean energy claims. 

Green Hydrogen has been a key area in defining cutting edge carbon accounting. In June 2023, the EU formally adopted its laws that defined what qualifies as “Renewable Hydrogen”. Despite some phase-ins, the law is revolutionary as it embeds a 3-pillar (i.e. Local, Additional and Hourly Matched) Granular Accounting framework for all Renewable hydrogen produced by 2030 in the EU. This is a massive signal, as 100s of TWhs of hourly matched power will be needed to meet the EU’s hydrogen targets. Crucially, the rules apply for all hydrogen imported into the EU also, creating a signal internationally for a move to granular accounting systems. The EU’s move to granularity was further reflected in the Renewable Energy Directive finalized in September 2023, which formally created time-stamped Granular Guarantees of Origin, the essential accounting tool for granularity, in EU Law. And it’s not just at an EU level that things are going granular in Europe.

Ireland’s climate action plan calls for data centres to show they are “using zero emissions electricity during the same hour and geographical location to match all of their consumption on a 24-hours a day, seven days a week basis” and this was applied as a requirement in recent planning permission conditions for a large new data centre in Dublin. And it’s being embedded in imports also, as Germany launched a billion dollar tender in 2022 for Ammonia imports, which requires hourly matching.

Across the Atlantic in the United States, rules are also going Granular. President Biden signed an executive order in 2021 which committed the US federal government to “match use on an hourly basis to achieve 50 percent 24/7 carbon pollution-free electricity” and at COP28 it announced it would join the United Nations 24/7 Carbon-free Energy Compact.

However, the pivotal U.S. decision on granular accounting relates to what qualifies as “Clean” hydrogen for the massive “45v” tax credit in the Inflation Reduction Act. In December 2023, the US government proposed rules   based on strong Granular “3-pillar” matching rules of new deliverable clean supply by the hour as advocated by many NGOs and forward-looking industry groups, including EnergyTag. The proposal is open for consultation until February 26 and the final decision will have far-reaching effects, with 10s of billions of dollars and 100s of millions of tons hanging in the balance. 

At a state level in the US, things are also starting to go Granular. Colorado will require “the matching of electrolyzer energy consumption with electricity production on an hourly basis” and in California retail power suppliers will be required to disclose the sources used to supply their power on an hourly basis by 2028. 

Some countries have gone Granular already. Since its creation in 2017, Taiwan’s REC system is designed so that green energy sourcing can only be claimed by a consumer if that energy is produced in the same 15 minutes as consumption. This approach is revolutionary and more advanced than systems in Europe and the United States today. Australia is updating  its energy tracking systems and intends to introduce time-stamping to facilitate increasingly granular green claims and to align with emerging international best practices. 

In the coming years, other countries will increasingly be defining their own carbon accounting and clean product rules for hydrogen, steel, aluminium, and many other electro-intensive processes.

Granular Accounting is crucial to ensuring this electrification is clean.  To stay in line with emerging international regulatory trends and remain cutting edge, this GHG Protocol update should pay close attention to the increasing view from regulators that Granular Accounting is the best-in-class basis for truly clean and zero-carbon electricity. To keep an eye on these regular regulatory updates, EnergyTag maintains a tracker:

Granular Accounting Regulations (Source: Granular – 24/7 in Action Tracker – EnergyTag).

Next week, in the final part of this blog series, we talk about feasibility and how to get granular done in practice. Stay tuned!