What is a green tariff?

Quick Answer: A green tariff is an electricity supply contract where your energy supplier guarantees that the electricity they put into the grid on your behalf comes from renewable sources. Under the GHG Protocol's market-based method, a qualifying green tariff can reduce your reported Scope 2 emissions. Not all green tariffs meet the quality criteria required for this, so the contract details matter significantly for carbon accounting purposes.

A green tariff is an electricity supply contract in which your energy supplier commits to matching your consumption with renewable energy generation, typically evidenced by certificates such as Guarantees of Origin (GOs) or Renewable Energy Guarantees of Origin (REGOs). For businesses measuring their carbon footprint, green tariffs are relevant primarily to Scope 2 emissions: the indirect emissions that result from the electricity you purchase.

How green tariffs work in practice

When you sign a green tariff, your supplier does not physically route renewable electricity to your premises. All electricity consumers connected to the national grid draw from the same undifferentiated mix of generation sources, which includes renewables, nuclear, and fossil fuels. What your tariff governs is what type of energy your supplier adds to the grid system on your behalf, not the electrons you actually receive.

The mechanism behind this is certificate-based. Renewable generators receive certificates for each megawatt-hour (MWh) of clean electricity they produce. Your supplier purchases and retires these certificates to substantiate the claim that your consumption has been matched with renewable generation. In the UK, the relevant certificates are REGOs, administered by Ofgem.

This distinction matters because it affects how credible your emissions reduction claim actually is, and whether it holds up under scrutiny from stakeholders, auditors, or reporting frameworks.

How green tariffs affect your Scope 2 carbon accounting

The GHG Protocol's Corporate Standard requires businesses to report Scope 2 emissions using two methods simultaneously: the location-based method and the market-based method.

The location-based method uses the average emissions intensity of the national grid, regardless of your tariff. It reflects the physical reality of what is generated to meet demand in your region. Switching to a green tariff does not change your location-based figure.

The market-based method takes your specific energy purchasing decisions into account. If your green tariff meets the GHG Protocol's quality criteria, you can apply a supplier-specific or contract-specific emissions factor, which may be zero or near-zero for a fully renewable supply. This is where a green tariff can reduce your reported Scope 2 footprint.

Both figures must be disclosed. A business cannot simply report the market-based number and omit the location-based one.

What makes a green tariff qualify under the GHG Protocol?

Not every green tariff is treated equally for carbon accounting purposes. The GHG Protocol sets out quality criteria that a tariff must meet before a market-based emissions factor can be applied. The key requirements are:

• Temporal matching: The renewable energy certificates must be redeemed as close as possible to the period in which the energy is consumed, not years after the fact.
• Geographic matching: The renewable energy must be sourced in the same market (typically the same country or grid region) as where the consumption occurs.
• Uniqueness: Each certificate can only be claimed once. Double counting, where the same renewable attribute is claimed by both the generator and the consumer, must be avoided.
• Supplier transparency: The supplier must publish a contract-specific or supplier-specific emissions factor using a clear and consistent methodology.

If your tariff does not meet these criteria, the GHG Protocol requires you to fall back to a residual mix emissions factor for your market-based figure. The residual mix represents the average emissions intensity of the grid after all claimed renewable attributes have been removed. Because it strips out the green energy already claimed by others, the residual mix factor is typically higher than the standard grid average. In practice, this means a low-quality green tariff can result in a market-based Scope 2 figure that is worse than your location-based one.

Why does tariff quality matter for carbon reporting?

The gap between a qualifying and a non-qualifying green tariff is not just a technical accounting detail. It affects whether your Scope 2 reduction claim is defensible to external stakeholders, including investors, customers, and frameworks such as SBTi, B Corp, SECR, and PPN 006.

A green tariff backed by REGOs that were issued years before your consumption period, or sourced from a different country's grid, does not demonstrate that your purchasing decision drove any additional renewable generation. Critics of the market-based method point out that even high-quality certificate-based tariffs do not necessarily require additionality, meaning the renewable energy may have been built regardless of your contract. This is an active area of debate within the GHG Protocol's ongoing Scope 2 guidance review.

For businesses that want their carbon data to hold up under scrutiny, understanding the basis of their green tariff and how it is accounted for is not optional. Reporting a zero market-based Scope 2 figure without being able to explain the quality of the underlying tariff is a credibility risk.

Green tariffs versus other renewable energy purchasing options

Green tariffs are the most accessible route to renewable energy purchasing for most businesses, particularly smaller organisations for whom a Power Purchase Agreement (PPA) with a renewable generator is not commercially viable. But they sit on a spectrum of options, each with different implications for carbon accounting and real-world impact:

• Green tariff: Supplier matches your consumption with certificates. Accessible, low-friction, but quality varies significantly.
• Power Purchase Agreement (PPA): A direct contract with a renewable generator, often with stronger additionality credentials and more specific emissions factors. Typically requires larger energy volumes and longer contract terms.
• On-site generation: Solar panels or other generation assets installed at your premises. Produces the strongest claim of zero Scope 2 emissions for the electricity generated, but is not feasible for most businesses operating from leased or multi-occupancy buildings.

For most businesses measuring their footprint for the first time, a green tariff is the starting point. The question is whether the specific tariff they hold meets the bar required to reduce their market-based Scope 2 figure, and whether that reduction is something they can stand behind when reporting to stakeholders.

At Seedling, we help businesses report both location-based and market-based Scope 2 figures in line with the GHG Protocol's dual reporting requirement, and we make the basis of every calculation transparent, including the quality of any green tariff being applied. That transparency is what makes the output usable with frameworks like SBTi, B Corp, and SECR, rather than just a number on a page.