The decarbonization solutions offered by ENGIE are: the Renewable Energy Contract (ENGIE-REC), the Renewable Energy Certificate (I-REC) and Carbon Credits. These solutions enable the customer to offset, reduce (either directly or indirectly) or even eliminate their GHG emissions altogether.
The traditional Power Purchasing Agreement (PPA) is a type of contract which allows the consumer, typically large industrial or commercial entities, to enter into an agreement with a specific energy generator unit. The contract itself specifies the commercial terms, including delivery, price, payment, among others. So that the consumer can declare that they are purchasing electricity from the specific generator, these characteristics should be contractually transferred to the consumer together with the electricity. While working in a similar way to the traditional PPA, the ENGIE Renewable Energy Contract (ENGIE-REC) has additional clauses based on the criteria laid down in the Technical Note to the Brazilian GHG Protocol Program with the Guidelines for registering Scope 2 emissions (available here), which testify that the energy generated by the generator unit originated from a specific renewable source not emitting GHGs, such as wind, solar and hydroelectric plants among others. Thus, by means of the energy purchase through an ENGIE-REC, a company guarantees the origin of energy generated and its renewable characteristic for the purposes of substantiating the offsetting of emissions arising from consumption of electricity supplied by the distributor. It is even possible to totally eliminate Scope 2 emissions from the company’s GHG inventory.
The International Renewable Energy Certificate (I-REC) represents a security which testifies that the energy was generated from a renewable source such as the sun, wind, water, biomass, biogas, geothermal, waves and tidal, guaranteeing such a condition based on the traceability of the energy’s origins. Since it is a negotiable instrument and not linked to physical energy in itself, I-REC can be acquired by any organizations, even those not actually consuming the unit of electricity which generated the certificate. These certificates can be employed by organizations to offset Scope 2 GHG emissions in their inventories. Each I-REC is equivalent to 1 MWh of generated and consumed energy. The RECs are issued based on certification systems, which have rules guaranteeing operationalization and their management based on governance policy of the institution concerned.
The Clean Development Mechanism (CDM) consists of a mechanism created to assist in the reduction of GHG emissions. The projects which are developed within the scope of the CDM are implemented in less developed and/or developing countries (such as Brazil), which can sell Certified Emission Reductions - CERs, commonly known as carbon credits, to developed countries to help them comply with their targets and commitments for reducing GHG under the Kyoto Protocol. The mechanism stimulates sustainable development and the reduction in GHG emissions at the same time giving industrialized countries some flexibility in the way they comply with their goals for reducing emissions under the Kyoto Protocol, in turn governed by the United Nations Framework Convention on Climate Change - UNFCCC. To be registered in the CDM, all and any carbon credits project must adhere strictly to all the mechanism’s rules and procedures, the Kyoto Protocol and the UNFCCC, including the Designated National Authority of the host country, which in Brazil’s case is the Comissão Interministerial de Mudança Global do Clima - CIMGC (Inter-ministerial Commission on Climate Change) and represented by the Ministry of Science, Technology, Innovations and Communications (MCTIC), responsible for authorizing Brazilian CDM projects. The quantity of carbon credits to be issued for each project must use specific methodologies of calculation and methodologies. These are subsequently audited by an independent third party and verified by the UNFCCC until the definitive issue of the so-called CERs. All information and official documents on the carbon credit projects in the CDM (from their validation to registration and subsequent verification and issue of the CERs) are publicly available by accessing the UNFCCC’s website (http://cdm.unfccc.int/). Each carbon credit is equal to 1 ton of CO2 equivalent (tCO2e). The carbon credits (or CERs) arising from CDM projects can also be used by any company, institution or even individuals wishing to offset their CO2 emissions in a totally voluntary and transparent manner. This is a new tendency adopted principally by companies from different segments and sectors of the economy committed to sustainability and reducing their carbon footprints.
Electricity delivered by ENGIE’s CDM projects to the National Interconnected System (SIN) would otherwise be generated through the operation of a mix of power plants connected to the distribution/transmission grid and by the addition of new sources of generation. On the other hand, ENGIE’s renewable energy projects registered in the CDM generate a reduction in GHG emissions due to the transfer of electricity normally supplied by thermoelectric plants fired from fossil fuels. The procedures and the calculations for determining the reduction in GHG emissions attributed to ENGIE’s renewable energy projects registered in the CDM are described in the approved ACM0002 methodology “Grid-connected electricity generation from renewable sources” (version 16.0), available in the United Nations Framework Convention on Climate Change – (UNFCCC) website.
ENGIE’s Renewable Energy Contracts (ENGIE-REC) allow the consumer in the Free Energy Market – typically large industrial or commercial enterprises - to enter into an agreement with one of ENGIE’s generator units. In this case, the consumer has a signed agreement with ENGIE, guaranteeing that it consumes energy from a renewable source, free from greenhouse gas emissions. In this way, through ENGIE-REC, a specific company can eliminate Scope 2 emissions from its inventory. Renewable Energy Certificates (I-RECs) are used to offset specifically Scope 2 emissions (purchase of electric energy) without an effective reduction in emissions. Basically, it is a confirmatory declaration that the consumption of electricity is made from renewable sources without GHG emissions. On the other hand, using CERs (carbon credits), both direct and indirect GHG emissions can be effectively reduced. Thus, the CERs can be used to offset Scopes 1, 2 and 3 emissions, including those for previous years up to the current year of the GHG inventory. In addition, given that the ENGIE-REC and the I-RECs are measured in MWh, calculation of GHG emissions is optional, being possible to offset emissions arising just on the basis of the amount of electricity which is consumed by any one customer. However in the case of carbon credits, tabulated in tCO2e, measurement of GHG emissions – irrespective of whether Scopes 1, 2 or 3 – must necessarily be in GHG emissions so that they can then be offset.
Three scopes are established for the purposes of registration and preparation of GHG inventories:
Scope 1: direct GHG emissions are those emissions from sources that are owned or controlled by the organization. Such might include emissions from combustion in boilers, furnaces, vehicles of the company or entities controlled by it, emissions from the production of chemicals in processing equipment which belong or are controlled by the organization, emissions from air conditioning and refrigeration systems, among others.
Scope 2: indirect GHG emissions from purchased electrical and thermal energy which is consumed by a given company.
Scope 3: indirect emissions which are emissions that occur as a consequence of the operations of the organization, but occur in sources which are not directly owned or controlled by that organization. For example: activities related to transportation, employee business travel, acquisition of energy which is resold for end consumers (reported by the energy company), among others.
The GHG emissions inventories with the respective classifications, enable the institutions to decide strategies for reducing and managing their emissions such as for example, the establishment of targets for reducing GHGs. Such initiatives are driven by: the minimization and management of organizational risks related to climate change; cost savings and as a stimulus to innovation; the preparation for future regulatory measures; as a demonstration of leadership and corporate responsibility; for participation in voluntary programs; among others.
On the basis of their GHG inventories, the organizations can use distinct instruments to offset part or all of their Scopes 1, 2 and 3 emissions, such as ENGIE’s renewable energy contracts (ENGIE-REC), the renewable energy certificates (I-REC) and carbon credits.
The GHG Protocol is a publicly available tool used for understanding, quantifying and managing Greenhouse Gas Emissions (GHG). Originally developed in the United States in 1998 by the World Resources Institute (WRI) in partnership with the World Business Council for Sustainable Development (WBSCD), it is the method most used worldwide by companies and governments to establish GHG inventories. It is also compatible with the ISO 14.064 norm, which established guidelines and requirements for developing, reporting and managing GHG inventories and using Inter-governmental Panel on Climate Change’s (IPCC) quantification methods.
The GHG Protocol provides the most used GHG registration standards in the world. The Corporate Accounting and Reporting Standard supplies the platform for registration and reporting for almost all the corporate programs for generating GHG reports in the world.
Companies and Organizations. In 2016, 92% of Fortune 500 companies, participants of the Carbon Disclosure Project (CDP), used the GHG Protocol directly or indirectly through a program based on the GHG Protocol itself.
Countries and Cities. Through their commitment to the Compact of Mayors, hundreds of cities throughout the world have committed to using the GHG Protocol for Cities. In addition, there are also partnerships with key countries for developing national GHG emissions’ programs based on the GHG Protocol.
In 2008, the GHG Protocol method was adopted in the national context by the Getulio Vargas Foundation’s Center for Studies in Sustainability (Centro de Estudos em Sustentabilidade da Fundação Getulio Vargas - GVces) and by the WRI in partnership with the Ministry for the Environment (MMA), the Brazilian Business Council for Sustainable Development (Conselho Empresarial Brasileiro para o Desenvolvimento Sustentável - CEBDS), the World Business Council for Sustainable Development (WBSCD) and 27 founding companies. Through engagement and technical and institutional training, the Brazilian GHG Protocol fosters a corporate culture of a voluntary nature for the identification, calculation and preparation of GHG emissions’ inventories. Among the principal benefits accruing from the program, the most significant are: competitive advantages (sustainable business); improvement in relations with stakeholders; registration of a track record of data and conditions for participating in carbon markets. The Brazilian Program organizes working groups drawn from participating companies for improving methods and developing new tools for recording GHG emissions in the context of the Brazilian reality. While the working groups, workshops for preparing GHG inventories and technical support are directed to companies participating in the Brazilian GHG Protocol Program only, the method and its updates are available in the publications and in the website for use by any interested organization. For more information, go to: https://www.ghgprotocolbrasil.com.br. In addition, information generated in the GHG inventories can be used in the reports and questionnaires involving initiatives such as the Carbon Disclosure Project (CDP), the Bovespa Corporate Sustainability Stock Index (ISE) and the Global Reporting Initiative (GRI).
There has been a RECs system in place in the United States for 10 years as well as in Europe. Both are subject to specific regulatory requirements, but also serve the voluntary market. Elsewhere in the world, the International REC Standard (I-REC) platform is used.
For a company to be able to report zero Scope 2 emissions, it needs to show that it has used renewable energy only. This can be done through the acquisition of I-RECs for the same quantity energy consumed in MWh. For example, if the company has consumed 500,000 MWh in 2018, it must acquire 500,000 I-RECs generated in 2018 in the same interconnected system. The emissions calculation is done by multiplying the total amount of energy consumed in MWh by the average emissions factor for the Brazilian network, (published from time to time by the Ministry of Science, Technology, Innovations and Communications - MCTIC), shown in tons of CO2/MWh. However, to arrive at the exact value of the quantity of RECs, all that is necessary is to find the total amount of energy consumed in MWh – This will represent the necessary number of RECs (to be able to declare zero emissions).
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