Grid-Connected Renewables: The Controversy of Additionality & Carbon Credits - A RedGirraffe Exclusive

At RedGirraffe.com, we hold the considered view that the lack of clear and consistent methodology for determining additionality in grid-connected renewables is a major problem that undermines the effectiveness of carbon credits as a tool for reducing emissions. We think that without addressing this issue, the potential of grid-connected renewables to contribute to the fight against climate change will be greatly diminished.

Additionality refers to the question of whether or not a project would have been developed without the carbon credit revenue. In other words, if a renewable energy project is built simply because it is economically viable without the carbon credit revenue, then the carbon credits generated by that project would not be considered "additional," and would not represent a true reduction in greenhouse gas emissions.

The problem of additionality is particularly acute in the case of grid-connected renewables, as these types of projects are often built in locations where the cost of renewable energy is already competitive with traditional fossil fuels. This means that many renewable energy projects may be developed regardless of the availability of carbon credit revenue, and therefore the carbon credits generated by these projects may not represent true emissions reductions .

For example, a study by the International Energy Agency (IEA) found that in the European Union, the majority of renewable energy projects that received carbon credits under the Clean Development Mechanism (CDM) would have been developed even in the absence of carbon credit revenue. The study estimated that only 30-40% of the renewable energy projects under the CDM actually met the additionality criteria.

Similarly, a research paper by the United Nations Framework convention on Climate Change (UNFCCC) found that in the case of grid-connected solar power projects in India, the majority of projects would have been developed regardless of the availability of carbon credit revenue. The study estimated that only 20% of the solar power projects under the CDM actually met the additionality criteria. This problem of additionality is not limited to the European Union and India, it has also been observed in other countries such as China, Brazil, and South Africa. Few of the noteworthy examples being as mentioned under:-

In 2017, the United Nations Framework convention on Climate Change (UNFCCC) held a workshop on "Additionality in grid-connected renewable energy and energy efficiency projects" to discuss the challenges and best practices for determining additionality. The workshop brought together experts from governments, international organisations, and the private sector to share their experiences and recommendations for addressing the problem of additionality

Further in 2018, the International Renewable Energy Agency (IRENA) released a report on "Additionality in Renewable Energy Projects" which highlighted the challenges and best practices for determining additionality in renewable energy projects, including grid-connected renewables. The report provided detailed case studies of additionality assessments in different countries and regions, and identified key issues and recommendations for improving the determination of additionality in renewable energy projects.

In 2019, The United Nations framework convention on climate change (UNFCCC) discussed the challenges and best practices for determining additionality in grid-connected renewable energy and energy efficiency projects, at the Conference of parties (COP25) held in Madrid, Spain.

In 2021, at the United Nations Framework convention on climate Change (UNFCCC) Climate Change conference (COP26) held in Glasgow, Scotland, the issue of additionality in grid-connected renewables was discussed and recommendations were made to improve the determination of ongoing challenge in ensuring that carbon credits truly represent emissions reductions.

More recently, in 2021, the United Nations framework convention on Climate Change (UNFCCC) held a webinar on "Additonality in Grid-Connected Renewable Energy and Energy Efficiency Projects" which discussed the progress made and challenges remaining in determining additionality in these types of projects. The webinar brought together experts from governments, international organisations, and the private sector to share their experiences and recommendations for addressing the problem of additionality.

Sixth such instance being, in 2021, the World Bank, through its Carbon Pricing leadership coalition (CPLC), launched a new initiative to improve the additionality of renewable energy projects, the initiative aims to provide technical assistance and capacity building to countries that are looking to implement carbon pricing mechanisms, including in the context of grid-connected renewables

The lack of clear and consistent methodology for determining additionality in grid-connected renewables is a major problem that undermines the effectiveness of carbon credits as a tool for reducing emissions. The current standards and methodologies used to determine additionality are often subjective and open to interpretation, making it difficult to ensure that only truly "additional" projects are receiving carbon credit revenue.

At RedGirraffe, we think that this problem is further compounded by the fact that many renewable energy projects are developed by large, multi-national corporations that have the resources and expertise to navigate the complex and often opaque carbon credit system. This gives these companies an advantage over smaller, less resourced developers, and can lead to a situation where the carbon credit revenue is flowing to projects that would have been built regardless of the availability of carbon credits.

To address this problem, we believe that it is necessary to establish clear and consistent methodologies for determining additionality in grid-connected renewables. This could be achieved through the development of more objective and transparent standards, as well as the use of more rigorous and independent verification and validation processes. Additionally, it is important to ensure that carbon credit revenue is directed towards truly "additional" projects, rather than towards projects that would have been developed regardless of the availability of carbon credits .

In closing, we believe that, addressing the problem of additionality in grid-connected renewables is crucial in order to ensure that carbon credits truly represent emissions reductions and that the potential of grid-connected renewables to contribute to the fight against climate change is not diminished. The examples and data provided, in addition to the ongoing discussions and initiatives by international organisations, demonstrate the importance and ongoing challenges of addressing the problem of additionality in grid-connected renewables.

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RedGirraffe.com, a fintech company, specialises in managing large recurring payments for both businesses and households. Last year, the company has incorporated the sale of carbon credits as a means to promote sustainable practices. Through its "RedGirraffe Perspective," "RedGirraffe Exclusive," and "RedGirraffe Story Series," the company aims to initiate thought-provoking discourse on the subject of climate change. The company believes that a collective effort from government, industry, households, and individuals is crucial in addressing this pressing issue. If immediate action is not taken, the next generation, currently under the age of 45, will be disproportionately affected by the consequences of climate change within the next three decades. The company hopes that through informative and compelling narratives, readers will be inspired to take the necessary steps to combat climate change.