If I move my company from a region with coal-based electricity to one with hydro-based electricity, can I sell the CO2 “reductions”?

If I move my company from a region with coal-based electricity to one with hydro-based electricity, can I sell the CO2 “reductions”?

Source: Dr. Mark C. Trexler

The simple answer is "probably not." But the question raises interesting issues that are worth a brief exploration.

It is true that one's greenhouse gas (GHG) footprint could differ depending on the source of the power in your area. If electricity is a big part of your footprint, you'd be including about a ton of CO2 for each MWh consumed in a coal-based power grid vs. almost nothing in a hydro-based power grid. So if you moved from one city to another, your GHG footprint might well look different. But it doesn’t necessarily follow that you could create marketable credits from the difference in the two footprints. There are several reasons:

The reductions that result from the change in location do not actually occur at your site and thus are "indirect." This means you can’t really claim ownership of the reductions. Indirect reductions are susceptible to double counting because the local utility also will count them towards its voluntary targets. The ownership uncertainty results in such reductions being less marketable.
To sell these indirect reductions you’d have to have a good sense of what they really amount to. Your local power grid could be 80% hydro, but as a new addition to the city maybe your power really comes from natural gas if the hydro is tapped out. Basing a simple footprint calculation on the 80% dominance of a given energy source wouldn’t be sufficient documentation to create a marketable credit. Figuring out the “true” reductions would be quite complicated (requiring post-hoc power grid modeling) and wouldn’t make economic sense. You’d also have to look at how other emissions might have changed, e.g. from having to ship your product farther to market.
It’s less and less clear that we should use regional CO2 power grid intensities in evaluating emissions reduction measures at all. Using regional intensities suggests, for example, that energy efficiency doesn’t help reduce GHG emissions if hydropower dominates the local grid. But what would actually happen with the saved electricity? In most cases, the utility would sell it to another region of the country where it probably would displace fossil fuels. So relying on regional grid intensities can be misleading from a GHG perspective.

At the end of the day, having everyone move to regions dominated by hydropower is not a practical way to reduce national GHG emissions. And while in a voluntary market people can buy and sell pretty much anything they want, I don’t see these reductions as being marketable.

Dr. Mark C. Trexler has more than 25 years of energy and environmental experience, and has focused on global climate change since joining the World Resources Institute in 1988. He is now president of Trexler Climate + Energy Services, which provides strategic, market, and project services to clients around the world.