The role of Guarantees of Origin in reaching sustainability targets

For years, companies in different sectors have set progressively more ambitious targets for carbon neutrality. The positive trend has accelerated after the Paris agreement managed to give clear premises to the previously highly variable topic. Over the previous decade, aiming for carbon neutrality has truly become the new standard.

Although the inventories vary a lot when considering private and public actors with very different operations, a common and dominant share of the carbon footprint often belongs to consumed energy. These are usually called scope 1 and 2 emissions. As energy efficiency and on-site renewable generation are often the most obvious means of cutting S1 and S2 emissions, the largest drops in companies’ emission inventories have often been achieved by choosing to buy renewable or emission-free energy. And this is where the Guarantees of Origin step in.

To put things in scope, in my experience, a typical company’s energy efficiency target for a single year could be between 1% and 3%. Stretching this over 15 years (since most commitments point to years between 2030 and 2040) would mean an average of 25% reduction in overall energy consumption. In comparison, companies deciding today to procure fossil-free or renewable power can reduce their carbon footprint by 25% – 75% (depending on the inventory) with a single sourcing decision!

It is important to highlight that these two means to achieve carbon neutrality are not competing. Energy efficiency and onsite production are always the primary method but are possible only to a certain extent. Guarantees of Origin complement the primary method by introducing the possibility to decide which type of energy to source.

The impact of these energy sourcing decisions is huge. As demand for renewable and fossil-free energy increases, the role of GOs has also become more important. For quite a long time, GOs for renewable electricity have made renewable power procurement transparent and reliable across Europe. The legislation and implementation on EU and national levels have set clear rules for each participating party providing actors in different parts of the grid the means to ensure the origin of electricity and avoid double counting.

Now the scope is widening. GOs will soon cover heating, cooling, and gas in Europe. The timing is also on point. As renewable power procurement has become the status quo, emission inventories still include high amounts of heating emissions in the Nordics and emissions from consumed gas across Europe. Parallel mechanisms to ensure the origins of these energy carriers will help companies use market instruments to further promote the renewable generation and emission reductions in the energy sector as well as companies’ inventories. New energy carrier certifications could also enable cross-carrier tracking for example when renewable electricity-powered equipment produces excess heat to a district heating network or power-to-X solutions convert renewable energy to green hydrogen. Practical implementation will probably take its time but it is very motivating to see new market opportunities forming.