A new analysis by S&P Global Commodity Insights supported by RNG Coalition, EBA, ERGaR, and Eurogas provides valuable input to the ongoing revision process of the GHG Protocol.
The use of certificates will be critical to meet the increasing sustainable RNG demand from the private sectors, support the economics of new production capacities and ultimately contribute to climate change mitigation efforts, according to S&P.
RNG Coalition, along with EBA, ERGaR, and Eurogas engaged S&P Global Commodity Insights to review certification and tracking systems for renewable natural gas (RNG) in Europe and the US.
The analysis examines the role of certificates for producers and consumers in major demand sectors, the additionality of RNG production associated with certificate use, and a review of historical certificate values in both regions, highlighting key price drivers.
RNG is a key driver of GHG emissions reductions, amounting to reductions of around 15 million metric tons of CO2e in the EU in 2023 and around 5 million metric tons of CO2e in the US.
Tracking the use of RNG through certificates conveys their renewable and climate value to energy consumers, providing sustainability guarantees and transparency about the production process.
This enables energy suppliers and large energy consumers to make credible claims regarding their commercial offers or their sustainability reporting, as they seek to reduce their GHG emissions and achieve decarbonisation targets.
As the RNG sector scales-up, certificates are critical for RNG producers to rely on market-driven revenues instead of government support schemes and allow RNG projects to be cost-competitive against conventional natural gas and other fossil fuels.
Demand for RNG procured via certificates comes from compliance markets (e.g. road transport fuels) and increasingly voluntary markets, with leading European and U.S. corporations such as food and beverage companies, chemicals producers or shipping companies.
In the US, market-based accounting systems in the Environmental Protection Agency’s Renewable Fuel Standard and state-level clean fuel standards have supported significant GHG emissions reductions in the transportation sector.
The well-established traceability and verification mechanisms that enable credible market-based accounting in these compliance markets have underpinned cost-competitiveness of RNG in the US.
The importance of robust RNG tracking systems and understanding the value of RNG certificates becomes apparent when considering the forecasted unprecedented growth in RNG production to 2030, added S&P.
In the US, expansion of federal and state-level incentives and compliance markets, coupled with heightened corporate sustainability demand, will accelerate RNG growth through 2030 that can serve diverse markets, it said.
Market momentum has already spurred a more than 13-fold increase in operational facilities in North America since 2011, with 435 operational facilities at present and another 455 facilities in some stage of construction or development. North America is home to 43,000 aggregated waste sites that could be attached to biogas or RNG infrastructure in the coming decades.
"A significant part of this growth needs to come from the voluntary market where the GHG Protocol guidance is an essential element as many companies rely on the protocol as main tool to account and report their GHG emissions," said S&P. "Currently, the GHG Protocol does provide no explicit guidance on how companies should use certificates to account for GHG emissions savings achieved by procuring RNG. RNG certification schemes have proved to functioning in helping to scale up RNG production in the EU and US compliance-based markets.
"The report released today stated that additional clarity and alignment on the inclusion of RNG in GHG Protocol, will facilitate the development of sustainable RNG production and use globally."
S&P Global Report on RNG certificates “upholds solidity of tracking systems”
