Are Recs Better Than Carbon Offsets?

Renewable energy certificates (RECs) and carbon offsets are two popular ways for individuals and businesses to reduce their carbon footprint. Both provide a way to compensate for carbon emissions by supporting renewable energy or carbon reduction projects.

RECs represent the environmental benefits of renewable energy generation. When renewable energy is produced, 1 REC is issued for every 1 megawatt-hour (MWh) of electricity generated. RECs can then be sold separately from the underlying electricity. By purchasing RECs, you are financially supporting renewable energy generation while still receiving your electricity from the regular grid. This helps drive demand for renewable energy.

Carbon offsets represent certified greenhouse gas reductions from projects such as reforestation or renewable energy. Offsets are measured in metric tons of carbon dioxide equivalent (CO2e). You can purchase offsets to counterbalance your own emissions, for example from travel or home energy use. The money goes towards projects reducing emissions elsewhere.

How RECs Work

Renewable energy certificates (RECs) are a market-based tool that helps incentivize renewable energy production. When a renewable energy project like a wind farm or solar installation generates 1 megawatt-hour (MWh) of electricity, they are issued a REC to represent the environmental attributes of that MWh [1]. The REC can then be sold separately from the actual electricity generated. This allows the environmental benefits to be accounted for even when the physical electricity is fed into the overall grid.

RECs provide a revenue stream and additional financial incentive for renewable energy producers. For each MWh of renewable energy generated, the REC can be sold to voluntary buyers who want to support clean energy. This extra income makes renewable projects more economically viable. RECs also help track renewable energy production. Each REC is numbered and tracked to guarantee that the environmental attributes are only counted once [2]. Overall, RECs play an important role in expanding renewable energy growth and accounting for its usage.

How Carbon Offsets Work

Carbon offsets allow individuals and companies to invest in environmental projects around the world to balance out their own carbon footprints. The projects are usually designed to reduce future emissions or remove existing carbon dioxide from the atmosphere (Constellation, 2020).

When you purchase an offset, the money goes towards funding projects like renewable energy, forest conservation, or capturing methane from landfills. Each project is analyzed to determine how much carbon it can reduce, and carbon credits are issued based on those reductions. One carbon credit represents one metric ton of carbon dioxide avoided or removed from the atmosphere (Sustainable Travel International, 2022).

Offsets enable companies and individuals to neutralize or even go “carbon negative” by investing in enough greenhouse gas reduction projects to exceed their own emissions. However, purchasing offsets does not directly reduce the purchaser’s own carbon footprint – the reductions occur elsewhere through the funded projects (Washington Post, 2020).

Comparing Environmental Impact

RECs and carbon offsets take different approaches to reducing environmental impact, though both help address climate change.

RECs, or renewable energy certificates, are a market-based instrument that represent the environmental benefits of renewable energy generation (https://carbonbetter.com/story/carbon-offsets-vs-recs/). When an organization buys RECs, they financially support and incentivize the production of renewable energy. This adds more clean power like solar or wind to the electricity grid and offsets fossil fuel-based generation. In essence, RECs increase the supply of renewable energy.

Carbon offsets work differently by funding projects that directly reduce greenhouse gas emissions to counterbalance emissions produced elsewhere (https://www.engieresources.com/recs-vs-carbon-offsets). For example, an offset may fund the capture of methane from a landfill or the distribution of efficient cookstoves in developing nations. While RECs add clean energy, offsets directly eliminate or avoid emissions from being released into the atmosphere. Offsets take a demand-side approach, reducing activities that produce emissions in the first place.

In summary, RECs add renewable energy to the electricity grid, while offsets reduce greenhouse gas emissions through verified climate projects (https://www.epa.gov/sites/default/files/2018-03/documents/gpp_guide_recs_offsets.pdf). Though their methods differ, both serve the goal of mitigating environmental impact and climate change.

Additionality

Additionality refers to whether a carbon offset or REC is funding new renewable energy projects that wouldn’t have happened otherwise, or just crediting existing renewable projects. This is a key difference between offsets and RECs.

For a carbon offset to be valid, it must prove additionality, meaning the emissions reduction would not have occurred if the offset funds were not provided (Source: https://www.offsetguide.org/high-quality-offsets/additionality/). Offsets only count emissions reductions that are additional to “business as usual” activities. Many offset standards require a detailed additionality analysis.

In contrast, RECs have no requirements to prove additionality and they are created for all new renewable energy generation, whether or not the projects needed REC funding (Source: EPA’s Guide on RECs and Offsets). For example, a wind farm built to meet a state’s renewable energy standard would still earn RECs. The environmental benefit of RECs is less clear than offsets.

Overall, carbon offsets more directly fund new emission reduction projects not viable otherwise. RECs simply track renewable energy regardless of additionality. Offsets are better for funding additional climate mitigation.

Verifiability

Verification and certification processes confirm the environmental integrity and impact of RECs and carbon offsets. Third-party standards like Green-e® and the I-REC Standard provide verification for RECs by ensuring they represent real renewable energy generation that wouldn’t have happened without the REC market. They verify the REC’s origin, double counting, and retirement after sale. However, the standards don’t guarantee actual reductions in global emissions since the renewable energy likely displaces lower-carbon sources instead of high-emitting sources like coal (1).

Carbon offset projects undergo third-party verification to ensure emissions reductions are real, additional, accurately measured, and not overstated. Verifiers confirm the project meets standards like the Verified Carbon Standard, Gold Standard, or American Carbon Registry using methodologies approved by offset registries. They may audit initial project plans, monitor implementation, measure outcomes, and verify reductions. While rigorous, verifications don’t eliminate questions around offset projects’ true impacts (2).

Cost Comparison

RECs tend to be significantly less expensive than carbon offsets. According to the EPA, the average price for a REC in voluntary markets is around $1 per MWh, though prices vary by region and market factors (EPA 2018). Carbon offsets can range from $1 – $50 per metric ton of CO2, with an average around $3 – $5 per ton according to Engie Resources (Engie 2022).

The reason for the lower cost is that RECs are focused solely on incentivizing renewable energy generation, which has gotten much more affordable over the past decade. Carbon offsets have to account for more variables like emissions reductions, carbon sequestration, administration fees, etc. So in general, purchasing RECs tends to be a more budget-friendly option.

Ease of Use

RECs are generally considered easier and more straightforward to purchase and use compared to carbon offsets. According to this EPA guide, RECs represent the environmental attributes of 1 MWh of renewable energy and are sold in set amounts. Companies can easily purchase the number of RECs needed to match their energy use. On the other hand, carbon offsets can be more complex. As explained by CarbonBetter, carbon offset projects vary greatly and calculating the exact amount of offsets to purchase to match emissions can be challenging. There are also more factors to consider such as location, type of project, standards, etc. In summary, RECs provide a more straightforward path to purchasing credits based on energy use, while offsets involve more variables and complex calculations of emissions.

Downsides

While RECs and carbon offsets both help mitigate climate change, they have some limitations and criticisms worth considering. According to Impactful, one downside of RECs is that they don’t directly reduce emissions from fossil fuel power plants. Buying RECs creates demand for renewable energy, but doesn’t affect existing dirty energy sources. With carbon offsets, a common criticism is that they allow companies to continue polluting while funding projects that may or may not truly offset their emissions. There are also concerns about the verifiability and additionality of some offsets (GreenBiz). Additionally, some claim that buying RECs and offsets allows organizations to “greenwash” their image without making meaningful changes to reduce their own emissions (S&P Global). While RECs and offsets play an important role, experts argue they should not replace direct efforts to decarbonize operations and transition to renewable energy.

Conclusion

In summary, both RECs and carbon offsets serve important roles in environmental sustainability efforts, but they work in different ways. RECs support renewable energy production by creating a market for credits tied to green power generation. Carbon offsets fund projects to reduce emissions to compensate for emissions elsewhere.

For individual consumers or households looking to reduce their carbon footprint, high-quality carbon offsets that follow strict standards offer a more direct emissions reduction impact. However, purchasing RECs can also displace dirty energy from the grid through market mechanisms, albeit in a less precisely verifiable way. From a pricing perspective, RECs tend to be cheaper and more accessible.

For larger organizations focused on emissions reductions and renewable energy commitments, using both RECs and carbon offsets in combination provides flexibility. RECs allow clean power usage claims in regulated electricity markets, while offsets enable neutralization of unavoidable emissions in line with climate goals.

Overall, RECs serve best as a market-based support for renewable power generation, while carbon offsets provide emissions reductions you can quantify. Individuals should carefully research offset quality, while organizations can pursue both to maximize impact.