How employers can evaluate transaction-funded climate-impact benefits

A vendor can own the solar farm outright, generate every megawatt-hour on site, and still have no right to tell you it uses renewable energy. That is the plain text of the Federal Trade Commission's Green Guides. Most benefits buyers do not know it when they sit down for the first vendor deck.

The claim travels with the certificate, not with the hardware. Once you know that, you stop judging how green a vendor seems and start asking three questions that have documents behind them.

The certificate carries the claim

Nobody can tell which electron on the grid came from a wind farm, so the green part gets stripped off the power and sold on its own, as a certificate. The EPA defines one as the property rights to the environmental and other non-power attributes of renewable generation, one certificate per megawatt-hour delivered to the grid.

Vendors skip what follows from that. Section 260.15 of the Green Guides says that if a marketer generates renewable electricity but sells the certificates for all of it, claiming to use renewable energy is deceptive.

The FTC's own example is a toy manufacturer with solar panels on the roof advertising a plant that is "100% solar-powered" while selling the certificates. By selling them, the regulator writes, it "transferred the right to characterize that electricity as renewable." You cannot even advertise that you host the panels, because a reasonable reader hears that as using them.

What the manufacturer may say is this: we generate renewable energy, but sell all of it to others. Hold any vendor claim next to that sentence and most of them collapse.

Three questions buyers collapse into one

A program that funds clean energy from transactions raises three separate questions. Most RFPs ask them as one, which lets the vendor answer whichever is easiest.

What instrument is bought? A renewable energy certificate, a carbon credit, and capital into building new generation are three different things with three different rule sets. A vendor that answers this question with the word "impact" has not answered it.

Who retires it, and in whose name? Retirement is what stops a certificate being sold twice. If the vendor retires in its own name, the vendor holds the claim. If it retires on your behalf, that has to be documented, and it changes what you can say.

What may you then say? This is the one that ends up in your annual report and your RFP responses, and the first two do not answer it. The answer is usually narrower than the marketing suggests.

The eight-point test already exists

You do not need to invent evaluation criteria. The GHG Protocol's Scope 2 Guidance sets out eight Quality Criteria that any contractual instrument must meet before it can be used in market-based Scope 2 accounting. Table 7.1, page 60. Send it to the vendor and ask them to answer against it.

Five of the eight apply to every instrument, whatever you bought. The certificate has to carry the emission rate of the power it came from, and it has to be the only certificate carrying that claim. It has to be tracked in a registry and retired by you or by someone acting for you.

It has to be issued and retired close to the year you are reporting. And the generation has to be in the same market as the offices burning the power. Together those five kill vintage-stacking, double counting, and certificates bought in one grid to cover consumption in another.

The last three are narrower. Six governs how a utility builds its own emission factor, seven covers on-site and directly contracted generation, and eight requires a residual mix for everything nobody claimed, or a disclosure that none exists. They matter to your accountant more than to your shortlist.

Go back to the market rule, criterion five. It is the one that quietly ends most benefit-program claims. If the generation is in one market and your offices are in another, the instrument does not qualify for your Scope 2 no matter how good the project is.

Offsets are a different instrument, with different rules

If what is being funded is a carbon credit rather than a certificate, section 260.5 of the Green Guides is the relevant text, and it sets three tests that are easy to check and often failed.

Sellers have to quantify the reduction with real science and real accounting, and they cannot sell the same ton twice. If the reduction will not happen for two years or more, that has to be disclosed. And a reduction that was already required by law cannot be sold as an offset at all.

The FTC illustrates the last one with a landfill that captures methane because state law requires it. Selling that capture as an offset is deceptive, because the reduction would have happened whether anyone bought anything. The guides never use the word additionality, but that rule is what enforces it.

What to ask for in writing

Six requests, all of which a legitimate provider can satisfy in a day or two. If any of them produces a narrative answer instead of a document, that is your finding.

• The retirement records, with serial numbers, and the name of the tracking registry holding them. Green-e requires a regional tracker such as M-RETS, WREGIS or ERCOT, so ask which one and get the serial numbers in it.
• The name the instruments are retired under, and whether the vendor also counts them in its own reporting.
• Green-e Energy certification, which is the established third-party check run by the Center for Resource Solutions. It restricts eligible generation to facilities built in the last 15 years and blocks the same power being counted toward a state renewable portfolio standard.
• A written answer against all eight Scope 2 Quality Criteria, criterion by criterion.
• The market boundary the generation is in, against the markets your offices are in.
• The exact sentence the vendor is willing to indemnify you for saying in public.

A provider confident in its instruments will write that sentence down. One selling atmosphere will want to keep the wording loose.

What it is worth when it never touches your Scope 2

A transaction-funded climate benefit will usually not reduce your reported Scope 2 emissions. Most buyers find that out at audit. The generation is in the wrong market, the retirement is in the vendor's name, or the instrument was never structured to be yours.

It is still real money reaching real generation, attached to spending you were doing anyway, and it costs the employee nothing. As a line in your carbon accounting it is weak. It holds up better as a benefit that steadily moves money toward new capacity.

The mistake is letting a vendor sell you the first while delivering the second. Ask which one you are buying, get it in writing, and describe it to your own people in those terms.

Dyme is in this category, so run the test on us. We put the profit from every booking into solar projects for schools and hospitals, which is generation funding rather than an instrument structured to land in your Scope 2. Ask us for the six documents above and we will tell you exactly which of them we can produce today.

Two things to line up alongside it: the tax and payroll treatment of the travel benefit itself, which is where most of the employee value is, and the booking and rewards mechanics your people will experience, because the funding only happens when someone books.