Annex 1: Carbon Accounting Methodologies Hierarchy

There are various carbon accounting methods that can be utilized, and SPs can employ one or more accounting methods to calculate their emissions footprint. However, there is a ‘hierarchy’ to these methods, based on their perceived impact of mitigating energy grid emissions, commonly referred to as ‘Additionality’. The various accounting methodologies are listed below, in descending order of perceived precision and Additionality:

1. Consequential Approach (1st Option): this method looks at the actual additional or marginal impact that Storage Providers create by choosing to draw energy from a specific grid. It avoids arbitrarily sharing responsibility for all emissions among all grid users and aims to show the actual impact that the electricity consumption has on the local grid.

   1. For the consequential method, SPs should use marginal emission factors, which are generally more accurate than average emission factors, and “reflect the emissions profile of a select subset of electricity generation facilities based on their role in the dispatch order of the system.”

   2. The WattTime API provides a comprehensive set of real-time marginal emission rates for most of North America, Europe, and Australia. The CDM database also provides some marginal emission factors for specific regions.

   3. When employing the Consequential Approach, its best to match electricity consumption with real-time renewable energy generation (high granularity EACs or GCs) on a 24/7 basis. By procuring granular EACs on a 24/7 basis, SPs can match energy consumption and renewable generation much closer, which can enhance the accuracy of their carbon accounting practices and increase local grid flexibility.

2. Market-based Attributional Method (2nd Option): this method relies on utilizing differentiated energy products in the form of contractual instruments (including direct contracts like PPA’s, or certificates like EAC’s), based on their availability in a given market.

   1. For the market-based method, Storage Providers should refer to Chapter 6 of the GHG Protocol Scope 2 Guidance for details on the appropriate contractual instruments and emissions factors they should use for their operations.

3. Location-based Attributional Method (3rd Option): this method relies on Regional and National production emission factors, which are generally annualized, and generalized averages that represent the grid emissions intensity and dynamics for an entire region or nation over the course of a year. These figures are generally significantly less precise than marginal emissions factors and should only be used when other information is unavailable.

   1. Regional emission factors are average emission factors “representing all electricity production occurring in a defined grid distribution region that approximates a geographically precise energy distribution and use area. Emission factors should reflect net physical energy imports/exports across the grid boundary.”(source) Examples of sources for these emission factors include eGRID total output emission rates (US) and Defra annual grid average emission factor (UK).

   2. National production emission factors average emission factors “representing all electricity production information from geographic boundaries that are not necessarily related to the dispatch region, such as state or national borders. No adjustment for physical energy imports or exports, not representative of energy consumption area.”(source) An example source of these emission factors is the IEA national electricity emission factors.

Section 01 of the CCA’s Carbon Accounting Guidance provides additional details on how individual crypto mining operators can account and report the emissions that come from their own electricity consumption. Figure 2 on Page 10 of the CCA Guidance is a useful guide for this decision-making process:

(source)