What is Impact Accounting?​
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To drive investments to the right places, clean energy buyers need to measure what matters most: emissions. That means we need to modernize the accounting system to focus on the emissions impact of energy procurement.
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Today, organizations report greenhouse gas emissions using the Greenhouse Gas Protocol (GHGP). For Scope 2 emissions - those from purchased electricity - the GHGP allows companies to use the market-based method (MBM) to report emissions by matching 1 megawatt-hour (MWh) of electricity load (Load) with 1 MWh of clean energy (RE) purchased within the same market. Any unmatched load is multiplied by the appropriate emission factor.
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​This approach is based on a fundamental assumption that all electricity in a given market over a given year has a uniform carbon intensity. However, advances in data availability reveal that this approach fails to reflect real-world variations in grid emissions throughout the day and across different regions.
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Impact Accounting is simple. Rather than restricting load and generation to be physically nearby in order to ensure the same emissions impact, it prescribes an appropriate emissions rate to each based on time and location. Colocated sites keep the same rate, but for the vast majority of power procurement that is not colocated, Impact Accounting more accurately compares the emissions impact between the load and generation sites.
Electricity Consumption Emissions Impact = Electricity Consumption Activity * MER1
Equation 1: Impact Accounting methodology, where load is measured in megawatt-hours, and MER1 represents the weighted marginal emissions rate (operational and build) at the load location.
The key difference between the Impact Accounting method and the existing MBM is that marginal emissions rates (representing the change in grid emissions due to incremental load or generation) are used to directly express the emissions impact of energy use based on generators on the margin. This is more in line with the GHGP Project Protocol, and measures emissions reduction efforts follows the same simple structure based on the generation site’s specific emissions reduction capabilities:
Electricity Generation Emissions Impact = Electricity Generation Activity * MER2
Equation 2: Emissions reductions calculation through the Impact Accounting methodology, where generation is measured in megawatt-hours and MER2 represents the weighted marginal emissions rate at the generation site.
Following guidance from the GHGP, the Project Accounting Protocol, and the proposed Scope 2 Marginal Impact Method (MIM), marginal emissions rates should contain the weighted average between operating margin (how incremental load or generation changes the operation of existing generators), and build margin (how incremental load or generation changes the future build of generators). Both rates are available through globally-accessible, free datasets. The exact implementation is still in discussion within the GHGP AMI subgroup, but just like current inventory standards, a corporation or municipality would likely only need three simple sources of data to use the Impact Accounting method:
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Load data from utility bills
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Generation data from offtake contract / clean energy project
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Emissions rates: publicly available MERs for both locations
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How Impact Accounting Drives Impact
The urgency of climate change demands that we prioritize clean energy investments that deliver the greatest possible decarbonization benefits to the grid.​
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Impact accounting directly measures the real-world emissions impact of load and clean energy generation. This ensures that no matter where companies choose to procure, they are accurately measuring and reporting the impact of their actions. Moreover, by shining a light on the emissions impact, impact accounting enables organizations to evaluate and prioritize procurements that will drive the greatest possible decarbonization benefits to the grid.
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Over the next 15 years, an emissions first approach could:
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Avoid 1.7 billion tonnes of CO2 and
Funnel $85 billion USD of investment into emerging economies
Adopting impact accounting and establishing flexibility in market boundary requirements would drive catalytic investments to economies that have not historically benefited from corporate investment in clean energy, while delivering the greatest possible decarbonization benefits to the grid.
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​In 2023, Salesforce committed to purchasing 280,000 MWh over the next eight years from small, distributed clean energy projects across Sub-Saharan Africa, Latin America and Southeast Asia. They prioritized sourcing projects in non-traditional markets, aiming to deliver both social and environmental benefits to local communities. These projects are expected to generate a significant emissions impact. Under the current system, there is no accountable emissions benefit for Salesforce’s action.​​​
It’s important to note that impact accounting is an accounting approach, not a procurement strategy. It offers a uniform way to appropriately measure and value a range of procurement actions — whether a company chooses to prioritize investments in clean energy close to home or in the world's dirtiest grids. To drive energy investments where they have the greatest impact globally, our accounting system must appropriately measure and enable a broad suite of meaningful procurement actions.
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