Relaxed Market Boundaries Can Promote Greater Energy Access & Decarbonization

New research reveals how cross-border renewable procurement can deliver a faster, cheaper, and more equitable energy transition

Research findings from a newly published study by the consultancy Baringa suggest there is a compelling opportunity to improve greenhouse gas accounting for maximum environmental, social, and economic benefits. The study shows that the Greenhouse Gas Protocol (GHG Protocol) can enable more companies to invest in clean energy projects that deliver the greatest social and decarbonization impact at the least-cost possible simply by relaxing market boundaries. 

Currently, the GHG Protocol and other initiatives like RE100 limit companies to procuring clean energy within the same market boundary as their energy consumption. This incentive structure channels most clean energy procurement and resulting investments to a handful of geographies with robust existing energy infrastructure while restricting procurement elsewhere. It also perpetuates underinvestment in clean energy in the places currently with the lowest levels of energy access and most carbon-intensive energy systems.

The study argues that by relaxing the market boundaries requirement, companies would gain the ability to apply the clean energy they procure anywhere (rather than only in the places where they currently consume energy) toward their Scope 2 emission reduction claims under the GHG Protocol. This would create new incentives for corporate procurement to support clean energy delivering the greatest potential for energy access and decarbonization. Greater flexibility around market boundaries can also enable companies to support the deployment of more clean energy in places where they can get installed more quickly and where their generation output is consumed more fully. Relaxed market boundaries thus appear an easy way to deliver a more equitable, decarbonized global power sector faster. 

Baringa’s study provides a detailed analysis assessing the potential impact of relaxed market boundaries and resulting new corporate procurement strategies that this would activate. By permitting companies to optimize their procurement in the places that offer the greatest energy access and decarbonization impact, the GHG Protocol could free up 325 terawatt-hours (TWh) of corporate demand currently constrained to select geographies by market boundary rules and drive ​​$85 billion of investment into developing economies by 2040.  The emissions impact would be significant, unlocking 1.7 billion tonnes of CO2 savings over the next 15 years, which is equivalent to taking more than 40 million cars off roads today. Furthermore, the Baringa study suggests that a borderless approach offers the most economically efficient way to accelerate the energy transition, reducing the cost of global power sector decarbonization by more than half. 

This new research lends greater support to the aims of the Leapfrog Alliance, a non-profit coalition calling for stronger incentives to increase corporate investment in clean energy access in unelectrified and underserved communities globally. It also lends greater support to the ambition of a growing network of corporate leaders such as the ten signatories of the Emissions First Partnership, that seek relaxed market boundaries so they can pursue procurement strategies that deliver the most energy access and decarbonization investment possible. As more companies learn about the benefits of more flexible market boundaries, they will likely join wider calls for the GHG Protocol to make this change.