Additionality Score
What is Additionality?
IRENA defines a renewable energy project as being additional if:
“The net incremental renewable capacity deployed or renewable energy generated as a direct result of corporate sourcing of renewable energy is beyond what would occur in its absence.”
The concept of additionality is used in carbon markets to assess if a project's GHG emissions reduction would have happened even without financial support or a carbon market. To be considered as a legitimate carbon offset, the GHG reductions achieved by a project should be "additional" or extra to what would have occurred if the project had not been carried out or continued as usual.
Carbon credits are only awarded to activities that wouldn't have happened otherwise or which are additional to the base case scenario. The Kyoto Protocol established three tests for projects to demonstrate their additionality:
Barrier test
First-of-its-Kind test
Financial Additionality test
PECs are aimed at promoting the growth of new renewable energy or storage projects in locations that maximize the grid carbon impact. However, there is no specific obligation for projects to demonstrate explicit additionality at the project level.
Additionality Assessment
To ensure that PECs contribute to new net generation on the grid and drive meaningful decarbonization, it is crucial to incorporate additionality attributes into the certificates.
Additionality is the principle that the certificates should lead to a net decrease in emissions that would not have occurred without the specific intervention. Adding these attributes makes PECs more valuable in promoting renewable energy projects and verifiable emissions reductions.
Here are some steps to incorporate additionality attributes into PECs:
Additionality attribute tagging: Incorporate this additionality attribute into the PECs issued for that project. This attribute should be transparent and easily traceable, allowing buyers and other stakeholders to verify that the PECs are associated with new net generation on the grid.
Registry integration: Integrate additionality attributes into PEC registries, enabling buyers and other stakeholders to easily track and verify the additionality of the PECs they acquire. This can enhance the transparency and credibility of the certificates, making them more valuable for corporate sustainability reporting and compliance purposes.
Several standard criteria are widely accepted in the carbon credit market to demonstrate additionality:
Financial additionality: Financial additionality can be demonstrated through financial indicators like internal rate of return, net present value, or payback period, comparing scenarios with and without the emissions reduction instruments.
Technological additionality: The project employs a technology or approach that goes beyond the business-as-usual practices in the industry or region. This can include using innovative or more efficient technologies that have yet to be widely adopted, resulting in greater emissions reductions than conventional methods.
Regulatory additionality: The project goes beyond the minimum legal requirements and regulations related to emissions reductions. This ensures that the project is not simply complying with existing policies but is taking additional voluntary steps to reduce emissions.
Barriers test: The project overcomes specific barriers that prevent the implementation of similar projects in the region or sector. Barriers can include financial, technological, institutional, or social obstacles that are addressed and overcome by the project, demonstrating its unique contribution to emissions reductions.
Standard practice test: The project goes beyond the common practices within the industry or region, indicating that it is not just following the standard approach to emissions reduction. Comparing the project's practices to similar projects or industry benchmarks can help demonstrate additionality.
Timing test: The project's development timeline should demonstrate that the decision to pursue the project was made with the consideration of potential emissions reduction instruments (e.g., PECs, carbon credits, or RECs). This helps ensure that the financial incentives these instruments provide play a role in driving the project's implementation.
This approach can strengthen the value of PECs as an innovative market instrument and facilitate more effective and transparent emissions reduction efforts across the electricity sector.
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