Renewable Energy Certificates, LGCs, and Carbon Accounting in Australia: What Actually Counts

Fourteen million LGCs were voluntarily cancelled in 2025, according to the Clean Energy Regulator's Q3 quarterly carbon market report. That's a record. And we'd wager at least a third of the companies behind those cancellations are still reporting their Scope 2 emissions wrong.

Not because the numbers are hard. Because the rules around renewable energy certificates, LGCs, and carbon accounting in Australia are genuinely confusing — and most sustainability teams learn the mechanics from a sales rep at their energy retailer rather than from the NGA Factors workbook or the NGER Measurement Determination. The retailer wants to sell you GreenPower. They don't care whether you understand the difference between location-based and market-based Scope 2, or why buying LGCs doesn't reduce your mandatory disclosure figure by a single tonne.

We've built Carbonly's Scope 2 engine to handle both methods. In the process, we've had to get deep into how LGCs, STCs, GreenPower, PPAs, and the brand new REGO certificates each interact with NGER, AASB S2, and the GHG Protocol. This post is the write-up we wish someone had given us before we started.

The Certificate Zoo: LGCs, STCs, and REGOs

Australia has three types of renewable energy certificates in active circulation, and they do very different things.

Large-scale Generation Certificates (LGCs) are created under the Large-scale Renewable Energy Target. One LGC equals one MWh of eligible renewable electricity generated by a power station — wind farms, utility-scale solar, hydro. The Clean Energy Regulator tracks them in the REC Registry. They can be created, traded, and surrendered (cancelled) through that registry. In 2025, between 54 and 57 million LGCs were created, with wind generation contributing 11 million in Q3 alone.

LGCs have two lives. First, electricity retailers must surrender them to meet their annual Renewable Power Percentage obligation under the LRET — 32 million were surrendered for 2025 compliance. Second, any business can voluntarily purchase and surrender LGCs to claim their electricity came from renewable sources. That voluntary market hit 14 million cancellations in 2025, up from 10.4 million in 2024.

Small-scale Technology Certificates (STCs) are different. They're created when someone installs rooftop solar (under 100kW), a small wind system, or a solar hot water system. STCs act as an upfront financial incentive — they reduce the purchase cost of the system. But here's the thing that catches people out: STCs don't work the same way as LGCs for carbon accounting. Under Climate Active's current rules, behind-the-meter generation from rooftop solar can be treated as zero-emissions regardless of whether you created and sold the STCs. You don't need to retain your STCs to claim the emissions benefit of your rooftop solar. But STCs can't be used to reduce emissions from electricity you purchase from the grid. They're a completely different instrument.

Renewable Electricity Guarantee of Origin (REGO) certificates are the newest addition. The GO Scheme launched on 3 November 2025, administered by the CER. REGOs are digital certificates — one per MWh, like LGCs — but with richer metadata: they record when and where the electricity was generated, not just how much. During the overlap period until 2030 (when the RET ends), eligible generators can create either LGCs or REGOs for each MWh, but not both. Think of REGOs as the successor to LGCs, designed with hourly matching and geographic traceability in mind.

We're still working out exactly how REGOs will be recognised under the NGER scheme's market-based method. DCCEEW has flagged that REGO integration into NGER reporting is under consideration for a future update. For now, LGCs and GreenPower remain the accepted instruments for market-based Scope 2 calculations under NGER.

What Renewable Energy Certificates Actually Do to Your Scope 2

This is where companies get tripped up, so we'll be direct.

Under AASB S2 paragraph 29(a)(v), you must disclose location-based Scope 2 emissions. That's the mandatory figure. You calculate it using your state's NGA grid emission factor multiplied by the electricity you consumed. LGCs, GreenPower, PPAs — none of them change this number. A Melbourne warehouse consuming 800,000 kWh reports 624 tonnes CO2-e using Victoria's factor of 0.78, regardless of how many certificates were bought and surrendered. That 624 tonnes is what goes in your ASRS disclosure. That's what your auditor tests.

Market-based Scope 2 is the supplementary number. This is where LGCs matter. Under the market-based method, electricity covered by surrendered LGCs or GreenPower purchases gets a zero emission factor. The uncovered remainder gets the residual mix factor — which is 0.81 kg CO2-e/kWh nationally, higher than any state's grid average because the renewable portion has been stripped out.

So buying LGCs doesn't reduce your mandatory AASB S2 disclosure. It reduces your supplementary market-based figure. That distinction matters enormously, and we see companies confusing the two all the time.

NGER has allowed voluntary market-based reporting since 2023-24. From the 2025-26 reporting year, there's an important change: if you opt to report market-based, you must do it for every facility under your corporate structure. No cherry-picking. You can't show market-based for the sites with GreenPower and stay quiet about the ones without. The CER's August 2025 guideline made this explicit.

GreenPower: How the Retail Product Works

GreenPower is a government-accredited program. When you buy GreenPower through your electricity retailer, the retailer purchases and surrenders LGCs on your behalf to cover the GreenPower percentage of your consumption. So GreenPower is really just a managed LGC procurement service with an accreditation stamp.

A few things changed recently. From 1 January 2025, GreenPower product percentages include the LRET's Renewable Power Percentage (which was 16.67% for 2026). That means "100% GreenPower" explicitly covers the mandatory LRET component plus additional voluntary LGC surrenders to reach full coverage. The programme also introduced a 27-month certificate vintage requirement — the LGCs your retailer surrenders must have been generated within the last 27 months, so you can't satisfy 2026 consumption with certificates from 2022.

And from 1 July 2026, accredited retailers can no longer offer consumption-based GreenPower products for sites in the ACT, given the territory's already high renewable penetration.

For carbon accounting, what matters is documentation. You need the retailer's confirmation showing the GreenPower percentage applied to your account, the billing period it covers, and evidence that LGCs were actually surrendered. If your utility bill shows a GreenPower component, Carbonly's AI extraction picks that up and apportions your market-based calculation accordingly. But the underlying location-based figure stays the same.

PPAs and Their Accounting Wrinkles

Power Purchase Agreements are where things get messy.

A PPA is a contract between a buyer and a renewable energy generator (sometimes arranged through a retailer). The two main types in Australia are wholesale PPAs — a direct financial agreement — and retail PPAs, brokered by an energy retailer. From a carbon accounting perspective, the critical question isn't what type of PPA you have. It's whether the LGCs transfer to you and get surrendered.

A bundled PPA where you receive both electricity and the associated LGCs — and those LGCs are cancelled in the REC Registry against your consumption — gives you a clean market-based claim. An unbundled PPA, or one where the generator retains the LGCs, does nothing for your Scope 2. Literally nothing. You're paying a financial premium for renewable energy but the zero-emissions attribute stays with the seller.

We've seen this go wrong more often than we'd like. A company signs a PPA with a wind farm, tells their board they've gone 40% renewable, and nobody checks whether the contract actually includes LGC transfer. When the sustainability team goes to calculate market-based Scope 2, they discover the generator kept the LGCs and sold them separately.

Check the contract. Then check the REC Registry surrender records. Don't assume.

The GHG Protocol is also tightening the rules on what qualifies as a legitimate market-based instrument. Their 2025-26 consultation proposed two major changes: hourly matching (your certificates need to match the hour of consumption, not just the annual total) and deliverability (the renewable generation must be on the same grid as your consumption). These aren't finalised yet, but the direction is clear — annual matching of LGCs to consumption is going to stop being enough. And if ASRS follows the GHG Protocol updates (as it historically has), companies with large PPA portfolios need to think ahead.

Certificates Are Not Offsets

This one keeps coming up, so here it is bluntly: LGCs are not carbon credits. They don't work the same way. Confusing them is a fast track to an ACCC greenwashing problem.

An LGC represents one MWh of renewable electricity that was generated. Surrendering it lets you claim that your electricity consumption was matched by renewable generation. It adjusts your market-based Scope 2 calculation. That's it.

An Australian Carbon Credit Unit (ACCU) represents one tonne of CO2-equivalent either avoided or removed from the atmosphere. ACCUs can offset Scope 1 emissions (under Safeguard Mechanism compliance) or be voluntarily surrendered against any scope. They operate in a completely different market, tracked in a different registry (ANREU vs REC Registry), and serve a different purpose.

The practical difference matters most when you're making public claims. Saying "we're powered by 100% renewable energy" based on LGC surrenders is defensible (if the surrenders are documented). Saying "we're carbon neutral" based on LGC surrenders is not — because LGCs don't touch Scope 1 emissions, don't touch Scope 3, and even the Scope 2 claim only works under the market-based method while your location-based disclosure stays unchanged.

The ACCC's greenwashing enforcement hit $42.95 million in penalties across four major cases in 2024-25. The AANA Environmental Claims Code, which commenced March 2025, requires that vague environmental claims like "green energy" meet a high standard of proof. If you can't show the LGC surrender trail in the REC Registry for every MWh you're claiming, you don't have proof. You have a marketing assertion.

Five Mistakes We See Constantly

We're not going to dress these up. They're common, they're costly, and at least two of them would survive initial review by a sustainability consultant who doesn't specialise in Australian electricity accounting.

Applying LGCs to Scope 1. LGCs are an electricity instrument. They reduce market-based Scope 2. They cannot offset natural gas combustion, diesel use, fugitive refrigerant emissions, or any other Scope 1 source. We've seen companies buy LGCs equivalent to their total emissions (Scope 1 + 2) and claim carbon neutrality. That claim doesn't hold up under any framework — not NGER, not AASB S2, not GHG Protocol, not Climate Active.

Claiming zero Scope 2 without specifying the method. Your location-based Scope 2 is never zero unless your consumption is zero. Even with 100% GreenPower, your location-based figure reflects the grid you're connected to. When a company reports "zero Scope 2" they almost always mean market-based zero — but if they haven't specified the method, they're making a misleading claim. Under AASB S2, the mandatory figure is location-based. Reporting zero without the location-based number alongside it is a disclosure failure.

Double-counting. This is the systemic one. Location-based grid emission factors already include the renewable generation on the grid. When you buy LGCs and also report a lower location-based figure, you're counting the renewable benefit twice — once in the grid average and once in your certificate claim. The correct approach is to report location-based using the standard NGA factor (which bakes in the grid's renewable share) and separately report market-based using the RMF for uncovered electricity plus zero for LGC-covered electricity. Two separate numbers. Two separate disclosures.

Surrendering LGCs but not retiring them properly. For an LGC to count, it needs to be cancelled (surrendered) in the CER's REC Registry. We've encountered situations where a company bought LGCs on the secondary market but never completed the surrender — the certificates sat in their registry account, still tradeable. That's like buying a carbon offset but never retiring it. The instrument only works when it's permanently removed from circulation.

Ignoring the vintage requirement. GreenPower now requires LGCs to be within a 27-month vintage. And even outside GreenPower, stale certificates are a problem. Using LGCs generated three years ago to claim renewable electricity for this year's consumption isn't best practice, even if it's technically allowed under NGER. The GHG Protocol's proposed updates would restrict vintage further. Our advice: match vintage to reporting year wherever possible.

How to Actually Set This Up

Here's the practical sequence, stripped of theory.

First, get your location-based Scope 2 right. That means matching every site to the correct state-based NGA emission factor, capturing actual kWh consumption from bills (not estimates), and building an audit trail from source document to calculated figure. This is your mandatory number. It needs to withstand assurance.

Second, identify which sites have contractual instruments — GreenPower contracts, LGC surrender agreements, PPAs with LGC transfer. For each one, collect the evidence: GreenPower percentage from your retailer, REC Registry surrender confirmations, PPA contract clauses showing LGC transfer. Store these alongside the utility bills they relate to.

Third, calculate market-based Scope 2. Covered electricity gets a zero factor. Uncovered electricity gets the residual mix factor (0.81 nationally, or the state-level RMF if available for 2025-26). If you're an NGER reporter using the market-based method, remember: it's all facilities or none.

Fourth, disclose correctly. AASB S2: location-based is mandatory, market-based is supplementary with disclosure of the contractual instruments. NGER: location-based is mandatory, market-based is voluntary but if opted in, applies across all facilities. CDP: both methods requested.

We're not going to pretend this is simple. But it's not ambiguous either. The rules are written down. The emission factors are published. The REC Registry is public. What trips companies up isn't complexity — it's assumptions that haven't been checked against the actual regulatory text.

One honest admission: the REGO integration into NGER market-based reporting isn't settled yet. We don't know whether REGOs will be accepted as market-based instruments for 2025-26 reports or whether that gets pushed to 2026-27. If your decarbonisation strategy depends on REGOs rather than LGCs, you're building on an instrument that doesn't yet have full accounting recognition under the NGER Measurement Determination. We'll update Carbonly's factor library the moment that determination lands, but for now, LGCs and GreenPower remain the safe instruments.

The spot price for LGCs has dropped from $22.50 at the end of Q1 2025 to around $4 in early 2026. That's a remarkable collapse — driven by oversupply as renewable capacity scaled faster than compliance demand. It means the financial barrier to voluntary LGC procurement has essentially disappeared. But cheap certificates don't exempt you from proper accounting. If anything, low prices make it even more important to get the reporting right, because more companies will buy LGCs and more of them will trip over the location-based vs market-based distinction.

Get the accounting right first. The certificates are the easy part.

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If you're juggling GreenPower contracts, LGC surrenders, and PPA documentation across multiple sites — and trying to report both location-based and market-based Scope 2 without losing your mind — Carbonly handles both methods with the NGA 2025 factors built in. One upload, both calculations, full audit trail.