Carbon Accounting, Environmental Certificate Treatment and Public Disclosure

Carbon accounting is a critical aspect of businesses’ sustainability strategies, aimed at measuring and managing the businesses greenhouse gas (GHG) emissions. High-quality Environmental Attribute Certificates (EACs) ensure credibility, transparency, and accuracy in reporting. With the growing number of certificates created globally, businesses need to understand the correct carbon accounting practices to meet their decarbonisation goals, without falling foul of greenwashing.   

This guide covers the different certificate types and their treatment under carbon and renewable energy reporting programs and accreditations, including the international Science Based Targets Initiative (SBTi), Renewable Energy 100% (RE100), Greenhouse Gas (GHG) Protocol, and the Australian Government Climate Active Carbon Neutral as well as the Corporate Emissions Reduction Transparency (CERT) Reporting programs. 

Executive Summary 

The guiding principles of for carbon and renewable energy accounting under the SBTi, RE100, GHG Standard, Climate Active, CERT) include transparency, accuracy, consistency, avoidance of double counting, and third-party verification.  Under these principals if a business sells the RECs (LGCs, I-RECs) from a renewable energy project, they have transferred the environmental attribute to the buyer, and can no longer claim the renewable energy aspect of that project (they are effectively using grid-based energy) and must add those MWh back into their Scope 2 emissions. Hence, businesses with behind-the-meter solar that sell internationally recognised RECs (IRECs, LGCs) from that system can no longer claim renewable energy (from that system).  Likewise, if a business sells the carbon credits (ACCUs, VCUs, VERs) from a project, they must add the tonnes of emissions reductions from that project back into their Scope 1 footprint. 

Energy saving certificates (ESCs, VEECs) as well as Australian small-scale technology certificates (STCs) are treated differently. The Australian Government Climate Active Carbon Neutral program, and Federal Government Corporate Emissions Reduction Transparency (CERT) Reporting do not require businesses to increase their Scope 2 emissions by the MWhs represented by the energy saving certificates sold, nor the MWh of generation represent by the  STCs .   

  • VEECs, ESCs, & STCs cannot be purchased and surrendered to offset energy consumption and  
  • VEECs, ESCs & STCs are intended as upfront incentives overcome the barriers of energy efficiency and renewable energy and to reduce business’ energy bills.  
  • VEECs and ESCs are closed-loop legislated obligations on the energy retailers to drive energy efficiency. Retailers cannot use them to claim renewable energy or emissions reductions, nor can corporations buy these to reduce emissions; they are only used to meet their legislated obligation to incentivise energy efficiency projects under the state-based schemes

International programs don’t include energy-saving certificates as they don’t represent renewable or carbon attributes.  As such, the registration or sale of energy savings certificates (VEECs & ESCs), and STCs do not factor into carbon footprint or renewable energy claims.  

Northmore Gordon recommends: 

  • that in line with the guiding principles of transparency & accuracy that businesses should disclose the list of projects that have received funding from the sale of STCs, VEECs, and ESCs as well as the quantity of certificates for each project, but there is no need to account for the registration and sale of VEECs, these in carbon or renewable energy and;  
  • businesses should disclose the project sources and quantities of ACCUs, LGCs, I-RECs, ACCUs or Carbon Credits they have surrendered to offset their emissions when making carbon reduction claims and; 
  • renewable energy or emissions represented by LGCs, i-RECs and Carbon Credits sold (rather than surrendered) must be added back into the businesses carbon footprint. 

Guiding Principles when making Decarbonisation and Renewable Energy Claims

The guiding principles for making decarbonization or renewable energy claims under programs such as RE100, SBTi, Climate Active, and the Carbon Neutral Protocol can be summarised as: 

  • Transparency: Be transparent in report emissions, energy usage, and progress towards decarbonization or renewable energy goals, including methodologies and data sources. 
  • Accuracy: Ensure the data used for calculating emissions, energy usage, and progress towards goals is accurate, reliable, and verifiable. 
  • Consistency: Use consistent methodologies and assumptions each year to ensure comparability of their reported progress and claims. 
  • Third-party verification by accredited third-party organizations to ensure credibility and compliance with the program’s requirements. 
  • When using offsets or credits (environmental certificates) 
  • Additionality:  Certificates should come from projects that would not have occurred (additional) without the funding from creating credits  
  • Non-reversable cannot be easily reversed.  
  • Avoidance of double counting: Ensure that claims when a project sells the certificates, they do not still claim the emissions reductions or renewable energy for their own reporting. 
  • Measured and verified: is better than calculated (deemed) methods. 
  • Removals beats Avoided:  Carbon removal (sequestration) is perceived by the market as better than avoided emissions.  

Environmental Attribute Certificates 

Environmental Certificates quantify and decouple the environmental attribute from the project (or source) and allow it to be tradable on markets.   

Globally, there are three main types:  

  •  Renewable Energy Certificates (RECs) = 1MWh of renewable energy,  
  • Carbon Credits or Offsets = 1 tonne-equivalent of CO2 not emitted, and  
  • Energy Efficiency (White) Certificates = 1 MWh of energy saved. 

In Australia, the demand for certificates come from four sources. 

  • Energy Retailer obligations under legislated programs 
  • Federal Emissions Reduction Fund (for ACCUs) 
  • Businesses voluntarily or mandatory requirements to reduce emission, 
  • Traders aiming to profit from arbitrage or anticipated changes in legislation. 

Further Information on Environmental Certificates 

Renewable Energy Certificates (RECs, iRECs, LGCs, STCs) 

In Australia, the Renewable Energy Target (RET) is the main mechanism for incentivising renewable energy, and it creates two types of RECs; Large-scale Generation Certificates (LGCs) that are registered in arrears of measured generation, and Small-scale Technology Certificates (STCs) for systems less than 100kW that are calculated and registered once off for the expected generation through to 2030.  The Energy Retailers have obligations to purchase a percentage of their energy sales from renewable energy by purchasing STCs, and LGCs. 

The International REC (I-REC) Standard is a widely accepted system for tracking and trading renewable energy certificates across borders.  Australian LGCs are also accepted internationally. I-RECs & LGCs provide a reliable, transparent mechanism for businesses to claim renewable energy and reduce their Scope 2 emissions in accordance with the Greenhouse Gas (GHG) Protocol  

Carbon Offsets, Carbon Credits (ACCUs, VCS, VCU, VER

The Australian Government’s Emissions Reduction Fund (ERF) is an example of a carbon offset program, which helps businesses meet their emissions reduction targets by providing financial incentives for emissions reduction projects. The ERF is underpinned by the (Carbon Farming Initiative) Act 2011 and its methodologies (1) and the Australian Carbon Credits Unit (ACCU).  ACCUs are either purchased through auctions under the ERF or by businesses doing wanting voluntary offsets for Climate Active Carbon Neutral Standard, or other voluntary programs. 

Globally, the Verified Carbon Standard (VCS) and the Gold Standard are widely recognized carbon offset standards that ensure projects meet stringent criteria for emissions reductions and sustainable development. Both VCS and the Gold Standard provide a registry system to track and retire carbon credits, ensuring transparency and avoiding double counting of emissions reductions. 

Energy Efficiency (White) Certificates (VEECs and ESCs) 

Energy Efficiency Certificates are tradable instruments issued by governments for verified energy savings achieved through energy efficiency projects. In Australia, the Energy Savings Scheme (ESS) in New South Wales and the Victorian Energy Upgrades (VEU) program in Victoria are the two White Certificate programs.  In both states the Energy Retailers have an obligation to purchase energy efficiency certificates proportional to gas and electricity sales. 

Globally, the European Union’s Energy Efficiency Directive (EED) encourages member countries to implement energy efficiency obligation schemes or equivalent policy measures, which often include the use of White Certificates. 

Certifications and Accounting Treatment for Environmental Certificates  

When registering certificates from a project it is important to understand the treatment of those certificates under different programs and whether they must be surrendered or when they can be sold. 

Climate Active Carbon Neutral 

The Australian Government’s Climate Active initiative provides guidelines for businesses to achieve Carbon Neutral Certification. To claim carbon neutrality, businesses must measure their emissions, set emission reduction goals, and offset any remaining emissions using eligible carbon offset units (9). The use of Australian Carbon Credit Units (ACCUs) from the ERF or other internationally recognized carbon offset standards, such as VCS and Gold Standard, is permissible for offsetting emissions under the Climate Active initiative Climate Active is transitioning to an increasing percentage of offsets from ACCUs. 

  • Scope 1 emissions are reduced through energy efficiency and emissions reduction projects.   
  • Scope 2 emissions can be reduced through energy efficiency projects including those funded through the state-based energy savings programs (selling VEECs or ESCs does not impact the reduce Scope 2 emissions).  Scope 2 emissions can be further reduced by buying LGCs (RECs), or commissioning renewable energy projects.    
  • The remaining Scope 1 emissions and relevant Scope 3 emissions are offset by buying and surrendering ACCUs and some international carbon credits. 

Science-Based Targets Initiative (SBTi) 

The SBTi is a collaboration between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The initiative helps businesses set science-based targets to reduce their GHG emissions in line with the Paris Agreement’s goals. SBTi does not promote the use of environmental certificates, it encourages businesses to prioritize emission reduction actions and supports companies in setting ambitious renewable energy procurement targets to reduce their Scope 2 emissions.  SBTi does not permit carbon offsets to reduce Scope 1 and Scope 3 emissions. 

Renewable Energy 100% (RE100) 

RE100 is a global initiative led by the Climate Group and CDP that brings together influential businesses committed to using 100% renewable electricity. Companies that join RE100 must have a public commitment to sourcing 100% renewable electricity by a specific target year. Businesses can surrender (retire) environmental certificates such as RECs, LGCs, Guarantees of Origin (GOs), or I-RECs to support their claims, as these certificates ensure the renewable attributes of the electricity procured by the businesses (12).  Australian STCs cannot be used. 

Carbon Neutral Protocol  

The Carbon Neutral Protocol, developed by Natural Capital Partners, is an international framework that provides clear guidelines for businesses to achieve and demonstrate carbon neutrality. The protocol requires businesses to measure their emissions, set reduction targets, and offset remaining emissions using verified carbon offsets from projects that adhere to recognized standards, such as VCS, Gold Standard, or American Carbon Registry (ACR). 


Green-e is a voluntary certification program for renewable energy and carbon offset products in North America. The program sets consumer protection and environmental standards for businesses to support their renewable energy or carbon offset claims. Green-e certifies both Renewable Energy Certificates (RECs) and carbon offsets that meet their strict criteria, ensuring that businesses purchasing these certificates can legitimately claim to use renewable energy or offset their emissions (13). 

Australian Safeguard Mechanism

The Safeguard Mechanism is part of the Australian Government’s Emissions Reduction Fund (ERF), which aims to help Australia meet its emissions reduction targets under the Paris Agreement. The Safeguard Mechanism came into effect on July 1, 2016, and is administered by the Clean Energy Regulator (1). 

The Safeguard Mechanism’s primary goal is to ensure that emissions reductions achieved under the ERF are not offset by significant increases in emissions elsewhere in the economy. It sets emissions baselines for facilities that emit large amounts of greenhouse gases (more than 100 kt CO2-e per year) (1). 

Facilities covered by the Safeguard Mechanism are required to keep their net emissions below their assigned baselines. If a facility’s net emissions exceed the baseline, the responsible entity must take steps to offset those excess emissions by either surrendering Australian Carbon Credit Units (ACCUs) or applying to the Clean Energy Regulator for a multi-year monitoring period (1). 

The Federal Corporate Emissions Reduction Transparency (CERT) Reporting 

CERT reporting was announced by the Australian Government in May 2021 as a new measure to improve transparency around large businesses’ emissions reduction activities (2). The CERT reporting aims to provide a clear and consistent framework for disclosing companies’ emissions reduction strategies, targets, and progress, making it easier for investors and consumers to assess businesses’ climate risk and performance. 

The Australian Government will consult with industry and other stakeholders to develop the detailed design of the CERT reporting framework. The framework is expected to be finalized and implemented by the end of 2022 (2). The CERT reporting will apply to large businesses (with more than $100 million in annual revenue) that are already reporting under the National Greenhouse and Energy Reporting (NGER) scheme (2). The introduction of the CERT reporting framework will help align Australia’s corporate emissions disclosure requirements with global best practices and support businesses in their transition to a low-carbon economy. 


The impact of buying or selling environmental certificates on businesses’ compliance claims depends on the specific standards or programs they adhere to. Purchasing eligible certificates, such as verified carbon offsets, RECs, or White Certificates, from high-quality projects under strong regulations, allows businesses to credibly claim carbon neutrality, reduced. 

Best Practices for Businesses Pursuing Decarbonization and Renewable Energy Goals 

To successfully navigate the various voluntary and mandatory carbon and renewable energy certifications, businesses should follow these best practices: 

  • Establish a clear sustainability strategy: Develop a comprehensive sustainability strategy that outlines your business’s emissions reduction targets, renewable energy goals, and other environmental objectives. This strategy should align with international agreements, such as the Paris Agreement, and be supported by science-based targets. 
  • Track and report emissions and energy consumption: Regularly monitor and report your business’s emissions and energy consumption, ensuring data accuracy and transparency. Use internationally recognized reporting frameworks like the GHG Protocol for a consistent approach. 
  • Engage with stakeholders: Engage with various stakeholders, including employees, investors, customers, and suppliers, to ensure support for your sustainability initiatives and foster collaboration. 
  • Invest in energy efficiency and renewable energy: Implement energy efficiency measures and invest in renewable energy sources to reduce your business’s carbon footprint and dependence on fossil fuels. 
  • Utilize environmental certificates responsibly: If purchasing or selling environmental certificates, ensure that the associated environmental attributes are accounted for correctly, avoiding double counting and adhering to the principles and requirements of the relevant certifications and programs. 
  • Seek third-party verification: To enhance credibility, obtain third-party verification of your emissions data, reduction strategies, and renewable energy claims. This step can increase stakeholder trust and provide assurance that your business is meeting the requirements of various certifications and programs. 
You may also like:

Latest Updates