For organizations committed to sustainability, Renewable Energy Certificates (RECs) and carbon offsets provide practical ways to reduce environmental impact and showcase eco-friendly practices.
Companies purchase these tools to support renewable energy, manage carbon footprints, and align with regulatory standards—each contributing to broader environmental and business objectives. From enhancing brand reputation to meeting net-zero goals, RECs and offsets play distinct roles in sustainability and energy procurement strategies.
Let’s break down the unique benefits of RECs and carbon offsets, explore their differences, and offer guidance on how to choose the best option to achieve your company’s sustainability targets.
What Are Carbon Offsets?
Carbon offsets allow companies to compensate for emissions that are difficult to eliminate within their business operations. By funding projects that reduce greenhouse gases—such as reforestation or methane capture—businesses can counterbalance emissions from activities like transportation or manufacturing.
Title: How Carbon Offsets Work
Description: Carbon offsets allow companies to compensate for emissions by investing in environmental projects that reduce greenhouse gases. Here’s how they work:
- Step 1: Identify Emission Sources
Companies start by assessing their operations to identify emissions from hard-to-reduce areas (think transportation or manufacturing). - Step 2: Calculate Emissions to Offset
Organizations quantify their emissions to determine how many carbon offsets they need to meet their sustainability goals. - Step 3: Select and Fund Offset Projects
Businesses select specific offset projects—such as reforestation, methane capture, or renewable energy—and provide funding. These projects are chosen for their effectiveness in reducing or capturing greenhouse gases. - Step 4: Emissions Reduction Verified
Certified offset projects track and verify the greenhouse gas reduction achieved. Each purchased offset represents one metric ton of CO₂ reduced or removed from the atmosphere. - Step 5: Apply Offset Credits
Companies apply their purchased offsets to their carbon footprint, helping them reach carbon-neutral or other sustainability milestones.
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What Are RECs?
Renewable Energy Certificates (RECs) focus specifically on electricity and are a valuable part of energy procurement strategies. Each REC certifies that 1 megawatt-hour (MWh) of renewable energy has been produced and delivered to the power grid. By purchasing RECs, businesses can claim renewable energy use, even if they’re not directly connected to renewable sources. This makes RECs ideal for supporting energy procurement goals in regulated electricity markets.
Title: How RECs Work: Supporting Renewable Energy
Description: RECs allow companies to claim renewable energy use, even if they aren’t directly connected to renewable sources. Here’s how RECs make an impact:
- Step 1: Renewable Energy is Produced
A renewable energy facility, such as a wind or solar farm, generates electricity, feeding it into the power grid. - Step 2: REC Creation and Issuance
For every 1 MWh of renewable energy produced, a REC is created, certifying that clean energy was added to the grid. - Step 3: REC Purchase by Businesses
Organizations purchase RECs, enabling them to claim the renewable energy attributes associated with that certificate. - Step 4: Support for Renewable Energy Markets
By buying RECs, companies help fund renewable energy projects and stimulate demand, indirectly increasing renewable energy availability in the power grid. - Step 5: Claim of Renewable Energy Usage
After purchasing RECs, companies can legally claim renewable energy use, even if the electricity they consume doesn’t directly come from renewables. This supports their sustainability goals and meets regulatory or reporting standards.
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Carbon Offsets vs. RECs
|
Attribute |
Carbon Offsets | Renewable Energy Certificates (RECs) |
| Measurement Unit | Measures in metric tons of CO₂ or CO₂e | Measures in megawatt hours (MWh) |
| Source of Credit | Generated through carbon reduction projects, like reforestation | Generated by renewable electricity sources, like wind or solar |
| Core Purpose | Aims to offset or reduce greenhouse gas (GHG) emissions | Certifies the use of renewable electricity |
| Application Scope | Broadly applicable to various emissions (e.g., transportation, agriculture) | Specifically tied to electricity-related emissions |
| Impact on GHG Reporting | Reduces or offsets Scope 1, 2, or 3 emissions | Lowers market-based Scope 2 emissions |
| Environmental Claim | Supports claims of reduced or avoided GHG emissions | Supports claims of renewable electricity use |
| Additionality Requirement | Requires additionality verification to ensure true emissions reduction | No additionality requirement; represents existing green power |
| Best Fit | For businesses aiming to neutralize emissions from both electric and non-electric sources | Ideal for companies focusing on renewable electricity in their energy mix |
Which Option Suits Your Business Needs?
Choosing RECs, carbon offsets, or a mix of both depends on your organization’s sustainability goals and where your emissions are primarily coming from.
If your focus is on renewable energy, RECs are a strong fit. They’re ideal for organizations that want to support renewable electricity generation and claim renewable energy use, even without direct access to green power. RECs work well for companies where electricity is the main emissions source, providing a straightforward way to offset these emissions and align with renewable portfolio standards (RPS) by tracking each megawatt-hour of renewable power supported.
For companies with broader emission sources, carbon offsets may be the better choice. Offsets cover a wider range of emissions beyond electricity, making them suitable for businesses aiming for carbon neutrality. They also support a variety of global environmental projects, allowing your organization to contribute to diverse efforts such as forest conservation or clean water initiatives.
In many cases, combining RECs and carbon offsets offers the most comprehensive approach. This energy procurement strategy allows you to directly support renewable energy while also addressing non-electric emissions, creating a well-rounded sustainability impact that aligns with both local and global stakeholders.
Pilot Energy As Your Partner In Energy Procurement
Founded in 2001, Pilot Energy is an unbiased and independent energy procurement advisor that empowers leaders to confidently know when, where, and how much energy to purchase by leveraging our unique blend of industry knowledge and innovative digital platforms. Putting our know-how to work daily, we drive clarity and control in decision-making and take pride in providing unparalleled personalized service. Guiding businesses with strategic innovation while committing to sustainable solutions.
Reach out today to learn how renewable energy solutions can align with your business’s sustainability goals and help you make a meaningful impact.
