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Glossary · Energy industry & energy transition

Chain of Custody

Chain of custody supply chain certification Guarantee of origin Carbon footprint sustainability

Chain of custody, in German roughly "Produktkette" or "Rückverfolgbarkeitskette", refers to the documented and controlled transfer of a product, material, energy carrier or certificate along a supply chain. It is not only about transport or trade. What matters is how a particular attribute is verifiably preserved. This may be origin, a sustainability status, the carbon intensity, a recycled or biomass content, renewable generation or another certified quality claim.

Why a chain of custody is needed

Many energy attributes cannot be recognised in the end product. A kilowatt hour of electricity from the grid carries no marking showing whether it comes from wind power, coal, photovoltaics or hydropower. A hydrogen molecule does not reveal whether it was produced with renewable electricity, from natural gas or with nuclear power. Likewise, an industrial good does not show which electricity mix or which process heat was used in its manufacture. The chain of custody replaces this missing physical recognisability with rules, documentation, accounts, audits and clear responsibilities.

It must therefore be distinguished from the mere supply chain. The supply chain describes which actors are involved in production, transport, processing and sale. The chain of custody describes how a claimed attribute is transferred in a controlled manner across these stages. It answers questions such as: Who may declare an attribute? Which quantity is credited to which account? What happens when certified quantities are mixed with non-certified ones? Which evidence is recognised, and who verifies it? How is double counting prevented?

The five models under ISO 22095

The international standard ISO 22095:2020 ("Chain of custody – General terminology and models") harmonises the terminology and distinguishes five models. In two models the quantities remain physically unmixed. In the other three, quantities with and without the claimed attribute are mixed. The models differ above all in how certain it is that the claimed attribute is actually physically present in the delivered product. The earlier version of this entry named only four models and did not name the first one according to the standard. This has been corrected here.

  • Identity Preserved, i.e. preservation of identity: The material comes from a single certified source and is kept separate throughout the entire chain. An example is timber from a specific, named forestry operation.

  • Segregated, i.e. separation: Certified quantities from several sources may be combined. However, they are not mixed with non-certified material.

  • Controlled Blending, i.e. controlled mixing: Certified and non-certified material is mixed in a known ratio. This share is then actually present in every delivered unit.

  • Mass Balance, i.e. mass balancing: The material may be mixed freely. The attribute is recorded quantitatively via an account, so that over a defined period no more certified quantity is withdrawn than has been put in. However, the certified material must have physically entered the same system. An individual delivery may therefore contain less of it or none at all. ISO 22095 provides for a rolling average proportion method and a credit method.

  • Book-and-Claim: The attribute is completely decoupled from the physical product and transferred via tradable certificates. Under ISO 22095, it is not possible within the same chain to switch back from book-and-claim to another model.

Electricity: book-and-claim with guarantees of origin

In the electricity grid, fed-in and withdrawn electricity cannot be physically separated, because grid operation follows electrical flows and not contracts. The electricity market therefore works with accounting-based instruments. In the EU, the central instrument is the guarantee of origin under Article 19 of the Renewable Energy Directive (EU) 2018/2001. It is an electronic document and serves exclusively to demonstrate to final customers a share or quantity of renewable energy. By default it applies to 1 MWh. Under the consolidated version, it can be divided into fractions, provided these are a multiple of 1 Wh. At most one guarantee is issued for each unit of energy produced.

For transactions, a guarantee of origin is valid for twelve months from production. If it has not been cancelled, it expires at the latest 18 months after production. For electricity disclosure, energy companies must cancel guarantees of origin at the latest six months after the end of their validity. With cancellation, a guarantee is definitively allocated to a consumption and can no longer be sold afterwards. Only this registry principle makes book-and-claim reliable. The rules guarantee a unique allocation over a period of up to more than one year. However, they do not prove that a specific plant supplied a particular consumer in a particular hour.

Biofuels and biomass: legally required mass balance

For biofuels, bioliquids and biomass fuels, Article 30 of Directive (EU) 2018/2001 requires a mass balance system where these are counted towards EU targets, quotas or support. Following the amendment by Directive (EU) 2023/2413 (RED III), this also applies to renewable fuels of non-biological origin (RFNBO) and to recycled carbon fuels. Information on sustainability and greenhouse gas savings must remain assigned to the mixtures. What is withdrawn must, in total, have the same attributes in the same quantities as what was supplied, and this balance must be settled within an appropriate period. In addition, each consignment is to be counted only once towards renewable energy consumption. It must be stated whether support was granted for its production. In practice, voluntary certification schemes recognised by the Commission verify compliance.

Hydrogen: temporal and geographical allocation rules

For green hydrogen, EU law tightens the allocation further. Delegated Regulation (EU) 2023/1184 sets out when grid electricity may count as renewable for RFNBO. For this, temporal correlation must be met: from 1 January 2030, the fuel must be produced in the same hour as the contractually sourced renewable electricity; before that, monthly matching is sufficient. Geographical correlation must also be met, as a rule by being located in the same bidding zone. In addition there are criteria on additionality. The example of hydrogen shows that it is the rule that determines which claim is permissible, and not the label "certified".

What a chain of custody achieves and what it does not

No model is good or bad in itself. Its informative value depends on which claim is based on it. Book-and-claim can make the financial allocation of renewable generation transparent. However, it is not sufficient as evidence of physical supply in every hour. A mass balance is practicable in gas and chemical chains where physical separation would be disproportionately expensive. It becomes misleading when customers infer from it the exact composition of an individual product. The standard therefore requires disclosure of the model used.

Chain of custody is often equated with climate impact. A properly documented proof, however, initially only improves attributability. It does not guarantee that additional emissions were avoided. Those who buy guarantees of origin change their reported electricity procurement, for example in market-based Scope 2 accounting. Whether new plants are built as a result depends on market design, demand effect, support rules and additionality criteria. For the carbon footprint, a chain of custody is therefore a prerequisite for reliable data, but does not replace examination of the real impact.

Digital tools such as databases, sensors or blockchain registries likewise do not resolve the question of which attribute may be transferred. They make manipulation more difficult. A weak rule, however, is not made stronger by tamper-proof storage; it is merely stored permanently. What matters are the accounting period, system boundary, permitted mixing, audit obligations and the treatment of losses. For mass balance, these include, for example, conversion factors between the raw material used and the product generated.

Three levels: physical, contractual, accounting

In electricity consumption, three levels do not automatically coincide. Physically, a consumer draws electricity from the grid. Contractually, it obtains a particular tariff or a power purchase agreement (PPA, a long-term electricity supply contract). In accounting terms, it uses certificates for renewable generation. For grid operation, what counts is feed-in and withdrawal at the given moment; for the market, contract and settlement; for sustainability reports, the recognised allocation under a standard. Conflicts arise when statements are transferred from one level to another without disclosing the system boundary.

The more closely energy products are linked, the more important this precision becomes. Green hydrogen connects electricity generation, electrolysis, transport and industrial use. Battery supply chains connect raw materials, refining, cell manufacturing, electricity procurement and recycling. Biomethane, district heating and synthetic fuels have their own problems with mixing and accounting. A reliable chain of custody does not make any product cleaner. It determines how an attribute travels through the chain, which evidence applies and which claim is ultimately permissible. Without these rules, statements on origin and carbon intensity can hardly be distinguished from advertising.

Sources

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Edited by eCMS on 11.11.2026 17:14

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