Kevin Lucas
Director of Research, Alliance to Save Energy
The Conference of the Parties – now in its 22nd year – is upon us yet again, and attention is keenly focused on the goal made in last year’s Paris climate conference: limiting global warming to well below two degrees Celsiusby the end of the century. In order to achieve this goal and address other climate challenges we face, decision-makers around the world must use all tools available to them. Two of the best options we have are energy efficiency and renewable energy, and it is critical that we drive investment toward them. For this reason, the Alliance to Save Energy has developed the CarbonCount scoring tool, a third-party green bond certification in accordance with the CarbonCount methodology.
This tool evaluates bond investments in U.S.-based energy efficiency or renewable energy projects to determine how effectively they can be expected to reduce CO2 emissions per $1,000 of investment.Through the CarbonCount scoring process, the Alliance aims to push investments and favorable capital pricing toward projects that promise superior climate benefits.
What sets the CarbonCount scoring tool apart?
While other rating systems might offer a qualitative assessment of the “greenness” of an investment, a CarbonCount score is unique in that it takes a quantitative approach to determining the CO2 benefits associated with a project. This enables investors to perform an apples-to-apples comparison between projects located in different regions of the country and comprised of varying underlying assets. With this extra level of confidence about the CO2-reducing benefits of a project, investors will be able to better steer their support to the projects that have the greatest impact.
Industry leaders who have utilized the CarbonCount scoring tool have found that the tool allows them to transparently and effectively communicate the value of projects to investors.
“We find the CarbonCount score to be an efficient tool to evaluate and communicate a project’s environmental benefits to both equity and debt investors,” says Jeffrey Eckel, President and CEO of Hannon Armstrong, a leader in green bond financing. “By systematically using a quantitative and transparent metric that allows different projects and technologies to be compared and evaluated, the CarbonCount methodology enables more targeted investment choice by parties seeking to maximize their contribution to reducing CO2 emissions.” How does the scoring tool work? A CarbonCount score starts with a review of Independent Engineer reports for each project or subproject in a portfolio. These reports contain detailed information about the quantity of energy generated (for RE projects) or the amount of energy saved (for EE projects), which is then mapped into an hourly load profile. The data is thenentered into the U.S. Environmental Protection Agency’s AVoided Emissions and geneRation Tool (AVERT), which contains hourly marginal emissions profiles for ten geographic areas of the U.S., largely corresponding to the footprint of regional power grids. By using the marginal emission rather than average emissions, a CarbonCount score more accurately reflects the CO2reduction based on the actual time and location of the project’s energy generation or savings. This is a critical distinction, as not only are marginal emissions often higher than average emissions, but the energy profile of certain technologies or measures might differ substantially from a static, flat reduction. Generally, projects that are located in areas with a high-CO2 electricity system (that is, parts of the country where relatively more electricity is generated from coal, such as the upper Midwest) have better CarbonCount scores than projects located in low-CO2 grids (areas with higher natural gas or hydro power resources, such as the Northwest). Additionally, projects that generate or save more electricity per unit cost of the asset result in higher CarbonCount scores. While investors previously might have intuited these relationships, the CarbonCount score offers confirmation.
Opening the door to increased funding As the broad and rapid deployment of clean energy technologies becomes increasingly important for meeting energy needs while addressing climate concerns, financing will be a key element to unlock the potential of renewable energy and energy efficiency projects. The Alliance to Save Energy’s CarbonCount methodology will help investors target their funding to projects that have the best carbon reduction return for the dollar. And by making these choices easier and more transparent, we are optimistic that – at this critical time more funding will become available as we work to reduce CO2 The Alliance to Save Energy is an internationally known and respected non-profit organization that promotes energy efficiency worldwide to achieve a healthier economy, a cleaner environment and energy security. The Alliance works closely with diverse industry leaders, including Whirlpool Corporation, Lockheed Martin, Siemens, United Technologies Corporation and The Dow Chemical Company.
Kevin Lucas, Director of Research, Alliance to Save Energy
