Key findings
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Cities, corporations, and other institutions are increasingly pledging to decarbonize their operations to reduce their energy-related greenhouse gas emissions. Leaders of these organizations have two general approaches at their disposal: demand-side and supply-side. Supply-side options include clean energy purchases from local electric distribution utilities, wholesale acquisition, and the purchase of renewable energy credits without the associated energy. These options are widely used and have standards and market mechanisms built up around them.
Demand-side management, which includes energy efficiency and demand flexibility, is also important, but lacks key market services (e.g., streamlined decarbonization options, access to emissions data) to support cities’ and corporations’ decarbonization efforts. This is especially true for cases of deep decarbonization, where organizations attempt to lower their energy use and associated emissions on an hourly—as opposed to annual—basis. This report emphasizes the importance of DSM in achieving affordable, efficient decarbonization and offers recommendations for how DSM can be better leveraged to realize greater emissions reductions than are typical under the status quo.
Why decarbonize?
Many corporations claim to be invested in a clean energy economy, with many going so far as to set their own voluntary corporate decarbonization goals. However, for most corporations cost control is a top priority, meaning that they will pursue decarbonization only insofar as it is profitable to do so. By reducing energy use during expensive periods, energy efficiency and demand response often overlap with cost savings and emissions reductions.
However, not all benefits of decarbonization are strictly financial. Some corporations are motivated by a desire to innovate and to be perceived as leaders in moving away from fossil fuels and operating on clean energy. In addition to being a clean energy leader, being perceived as a leader in clean energy procurement can convey reputational benefits and strengthen a company’s public image.
Overcoming barriers
Cities and corporations are generally able to achieve their decarbonization goals more affordably with DSM than without it. Nevertheless, GHG-oriented energy efficiency and demand flexibility face several obstacles to adoption. Integrating DSM into decarbonization efforts can be hindered by its perceived complexity. Energy generation is usually easier to measure than energy conservation; supply-side resources are better characterized within existing tools and accounting frameworks. For example, meeting decarbonization goals through the purchase and retirements of RECs presents a seemingly more straightforward option for organizations than paying for energy audits, new technologies, and installation and maintenance costs of efficient equipment, especially if those more efficient options are perceived as having long payback periods. The demand-side equivalent of RECs, known as demand-side environmental attribute certificates (EACs), remain relatively underutilized.
Additional barriers include siloed structures that separate supply- and demand-side teams within organizations, not incorporating demand-side measures into decarbonization goals, and the absence of external standards that recognize deep decarbonization actions.
Solutions
For organizations that are interested in decarbonization, a variety of solutions can facilitate leveraging DSM to achieve their carbon emissions targets. In addition to roles for city and corporate leaders, roles also exist for market service providers like energy service companies (ESCOs), REC/EAC traders, and those who set decarbonization standards.
First, standard-setting organizations should establish a standard for decarbonization akin to the annual matching framework that in 2015 established what it means for an organization to run on 100% renewable energy. Second, more service providers should offer climate-forward efficiency services aligned with those standards to clients, similar to how others offer renewable energy procurement services on the supply side. This would involve offering more granular demand-side audits of an organization’s energy use and GHG emissions, streamlining planning processes required to incorporate GHG reductions into demand-side projects, appealing to as many motivations for decarbonization as possible, and encouraging organizations’ supply- and demand-side teams to work toward holistic solutions. Those organizations should then be able to identify and prioritize demand-side investments as part of a coordinated strategy for achieving their decarbonization targets.
Third, just as organizations can use RECs to purchase the environmental attributes of clean energy that they are unable to procure directly, environmental attribute certificates (EACs) that do essentially the same thing on the demand-side should be used more widely. Development of transparent, standardized measurement and verification (M&V) protocols by standard-setting organizations would help build trust in demand-side EACs. To gain widespread adoption, this M&V should be inexpensive and quick to execute. Who owns the EAC when multiple parties are involved will need to be clarified.
Together, these three steps will enable organizations unable to further reduce their own demand to financially support other buildings to do so, delivering efficiency where it might not otherwise be accessible while simultaneously conferring an environmental benefit to the organization purchasing the demand-side EAC.
Higher resolution understanding of energy usage and emission factors would help to target efficiency and load flexibility measures toward the times when carbon intensity is highest. These data can be obtained directly from the utility, acquired via direct metering, or purchased from third-party providers. From there, robust automation systems can help buildings react to real-time grid conditions and optimize their energy use. Governments should continue to support carbon-free electricity by setting or strengthening statewide climate targets, stipulating that ratepayer funds can be used to support electrification and other climate-forward efficiency measures, and clarifying regulatory responsibilities so that regulators are authorized and encouraged to consider the need to decarbonize when making decisions.
Download the research report
| Suggested Citation |
| Specian, Mike. 2025. Leveling Up Decarbonization: How Cities, Corporations, and Service Providers Can Leverage Demand-Side Measures for Emissions Reductions. Washington: DC: ACEEE. www.aceee.org/research-report/u2503. |
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Energy Efficiency and Climate Change Energy Data Sets and Resources Evaluation, Measurement, and Verification (EM&V)Authors
