How can investors understand CO₂e avoidance and how to measure it?

Commerz Real Institutional Renewable Energies Fund II

The fund promotes electricity generation from renewable energies. Due to its low production costs, electricity from renewable energy sources is given priority when fed into the grid. Through this effect, renewable energies across Europe ensure that emissions that would otherwise have been caused by the combustion of fossil fuels are avoided.¹  This avoidance effect is expressed as “avoidance factors”, which are published on a country-specific basis by the Technical Working Group of the International Financial Institutions (IFI)². Furthermore, the feed-in priority under the Renewable Energies Act³, which gives priority to electricity from renewable sources in the electricity grid (provided that grid stability is guaranteed), applies in Germany. When determining the CO₂e avoidance⁴ of the fund portfolio, the emissions from the materials and construction of the fund’s wind farms and solar parks are also taken into account.

The calculation of avoided CO₂e emissions is based on internationally established standards. The steps involved are:

  1. First, the amount of electricity generated by the renewable energy plants that, in retrospect, was actually fed into the electricity grid is recorded. These amounts of electricity are measured in megawatt hours.
  2. In a second step, the country-specific avoidance factors of the Technical Working Group of the International Financial Institutions (IFI) are obtained. These avoidance factors are based on the combined margin approach of the United Nations Framework Convention on Climate Change (UNFCCC), which is applied in the Clean Development Mechanism of the Kyoto Protocol for quantifying the emission reductions of energy generation projects (ACM0002⁵). The UNFCCC framework is a globally recognised standard for calculating emission avoidance through renewable energy projects.
  3. The gross CO₂ avoidance per year is calculated by multiplying the fed-in electricity in megawatt hours (in step #1) by the avoidance factor (in step #2).
  4. The CO₂e emissions produced by upstream processes, i.e. from materials and construction, are obtained by multiplying the technology-dependent upstream emission factors of the Federal Environment Agency by the megawatt hours produced. These upstream emission factors are also publicly accessible on a technology-specific basis⁶.
  5. The final net CO₂ avoidance results from the gross CO₂e avoidance (in step #3) minus the upstream emissions (in step #4).

The fund reports on the calculated CO₂ avoidance in its mandatory publications such as the Annual Report. In this way, the amounts of electricity fed in and the related CO₂e avoidance are transparent and verifiable for investors.

Important: While fed-in electricity is physically measurable, CO₂ avoidance by its very nature remains a calculated value that includes assumptions about how electricity generation would have developed without the feed-in from a renewable energy system and compares this with the scenario of the actual feed-in.

¹"The merit order principle benefits power producers with low variable costs (mostly from renewable energies) and thus supports their competitiveness." (Source: “Merit Order”, Deutscher Bundestag, 2022,, last accessed 16/02/2023)

² IFI TWG - List of methodologies | UNFCCC:, last accessed 17/02/2023

³ Renewable Energies Act:, last accessed 17/02/2023

⁴ In addition to carbon dioxide (CO2), other greenhouse gases are (climate) relevant. These include methane (CH4), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorinated hydrocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). These other greenhouse gases have a stronger impact on the climate compared to CO2 (e.g. 1 tonne of methane has the same effect as 28 tonnes of CO2, source: GHG Protocol:, last accessed 17/02/2023). The unit CO2 equivalent (CO2e) takes this fact into account and makes the offsetting of various greenhouse gases possible

⁵ UNFCCC: Grid-connected electricity generation from renewable sources (, last accessed 17/02/2023)

Federal Environment Agency: Emission balance of renewable energy sources (, last accessed 17/02/2023)