The effects of economic versus physical accounting when estimating greenhouse gas emissions from electricity consumed in a system with Guarantee of Origin to promote green power production

Indirect greenhouse gas emissions from electricity consumption is one of the cornerstones of environmental accounting, and the production and distribution of electricity is heavily scrutinized. The traditional method for... [ view full abstract ]

Indirect greenhouse gas emissions from electricity consumption is one of the cornerstones of environmental accounting, and the production and distribution of electricity is heavily scrutinized. The traditional method for estimating greenhouse gas (GHG) emissions from electricity is generally based on physical accounting principles, on the basis of domestic production, imports/exports, and distribution of electricity. However, this approach does not necessarily take into account newer market mechanisms and economic realities in the power sector, where disclosure and tracking of electricity allows trade of environmental attributes of electricity, which the Guarantee of Origin (GO) system makes use of. This system allows suppliers to add a GO-certificate to the delivered electricity, stating that an equivalent amount of electricity has been produced by renewable sources, regardless of the physical source of the electricity, and distance to the renewable power plant. The effects this have on GHG emissions in LCA are poorly studied, and how to do the accounting in a system with GO-certificates is not yet well understood.

This is exemplified with a case study of GHG emissions from electricity for the Norwegian housing sector. Final energy to the housing sector is dominated by electricity, and domestic production is almost only by hydropower. Moreover, Norway has a limited capacity for physical import/export of electricity. Contrasting this, the country is the largest exporter of GO-certificates in Europe, while the share of domestically consumed electricity with GO-certificates is still small.

This study examines the effects of using the physical accounting versus the economic accounting principle when estimating global GHG emissions from electricity supply to the Norwegian dwelling stock with empirical data for 2005 to 2015. Following the traditional physical accounting we use monthly values for electricity production, import/export and losses and obtain detailed information on the environmental consequences of electricity consumption in the Norwegian housing sector. Further, we demonstrate the effect different choices regarding emission intensities (average/marginal technology) will have on the total emission intensity of electricity consumption. In economic accounting, the rules of the GO system are taken into account, meaning that electricity holding a GO-certificate is assumed to be of renewable origin (e.g. hydro: 7 g CO₂-eq/kWh). Electricity without a GO-certificate is assumed to hold the environmental attributes of an annual product declaration (historically 350-500 g CO2-eq/kWh) replacing the attributes of “unknown” electricity with those of a European Attribute Mix.

The total estimated GHG emissions from electricity consumption in Norwegian dwellings vary significantly between the two accounting principles. Physical accounting generally yields low emission intensities and total annual emissions of approximately 1 million tonnes CO2-eq. With economic accounting, the GHG emissions are almost 18 times larger than the corresponding results from physical accounting. The results demonstrate that the choice of accounting method can be of great importance when estimating GHG emissions of a sector. Furthermore, the results show the consequence of a failed policy implementation, as the low demand for electricity with GO-certificates in Norway, leads to a national residual mix with much higher emission intensities than that of the domestic production.