As concerns about climate change grow, companies and individuals alike are looking for effective ways to set and achieve net-zero energy and greenhouse gas emissions goals, contributing to a sustainable planet. Two essential but fundamentally different instruments that have gained importance in recent years are offsets and renewable energy certificates (RECs). These mechanisms will play a crucial role in combating greenhouse gas emissions and promoting global environmental sustainability. In this blog post we will explore the differences between Offsets and RECs, including a modest attempt to harmonize the definitions of these key concepts and explain why both are essential and effective in the fight against climate change.
Understanding offsets: Offsets refer to the reduction of greenhouse gas emissions in one sector to offset emissions produced elsewhere. This is often achieved by an organization reducing its greenhouse gas emissions footprint by purchasing and decommissioning emissions through projects that actively sequester greenhouse gases or prevent emissions from being released. While there is no universally accepted definition among governments and standard-setting organizations of what constitutes an offset, these projects may involve renewable energy installations, methane capture from landfills, energy efficiency initiatives, reforestation efforts, or composting of food waste. each use as unit of measure metric tons of CO2 or CO2 equivalent. They reduce or ‘offset’ an organization’s Scope 1, 2 or 3 emissions, as a net adjustment valued by the market.
The benefit of offsetting is simple: If an individual or organization cannot eliminate all of its emissions immediately (for example, a tenant of an existing 80-story office building in an urban environment can only do so much on site), it can support emissions reduction projects elsewhere. to reach a net zero target. Offsets provide flexibility and scalability, allowing companies and individuals to contribute to sustainability efforts beyond the four walls and roof of their own company, which makes sense when climate change is a global problem. We blogged about it a few weeks ago The evolution of environmental offsets: from indulgences to greenhouse gas emissions reductions.
Unraveling RECs: Renewable Energy Certificates, commonly known by the abbreviation RECs, focus on promoting the generation of renewable energy. RECs are tradable instruments, with terms set by state and local regulators and electricity transmission authorities, making some RECs more valuable than others (e.g., solar REC prices in the U.S. today range from less than $ 5 to over $500). RECs use as their metric the property rights to the “renewability” (i.e. all non-power attributes) of one megawatt-hour (MWh) of renewable energy generated. When a renewable energy project produces electricity, it generates RECs proportional to the amount of clean energy it feeds into the grid. RECs can reduce an organization’s gross market-based Scope 2 emissions from utility-supplied electricity, which has a huge benefit for the planet.
By purchasing RECs, companies and private individuals can financially support sustainable energy projects, increasing the share of clean energy in the total energy mix. This in turn displaces energy from fossil fuels, reducing greenhouse gas emissions associated with energy generation.
The difference between offsets and RECs: The main difference between offsets and RECs lies in the nature of the greenhouse gas emissions reductions they enable. Offsets aim to compensate for emissions in various business sectors, including transportation, agriculture and industrial processes. On the other hand, RECs focus on increasing the production of clean energy from renewable sources such as wind, solar, hydroelectric and geothermal energy.
While both Offsets and RECs contribute to reducing greenhouse gas emissions, they operate in different areas, providing individuals and companies with diverse opportunities to take action on climate change.
The synergy between offsets and RECs: Offsets and RECs work synergistically to fight climate change and restore the planet. By using both mechanisms, companies and individuals can address a broader range of emission sources and promote the transition to a low-carbon economy.
Imagine a company that has already implemented energy efficiency measures to minimize direct emissions. To achieve further emissions reductions and achieve net-zero energy and greenhouse gas emissions, the company can invest in high-quality offsets from verified projects that address emissions at other locations. At the same time, the company can purchase RECs to support clean energy generation, indirectly reducing emissions related to electricity consumption.
The efficacy of offsets and RECs: The effectiveness of offsets and RECs lies in their ability to achieve real and measurable greenhouse gas emissions reductions. Offsets’ success depends on the quality of the projects they support and the extent to which they actually lead to emissions reductions beyond what would have occurred naturally or through regulation.
Likewise, the success of RECs depends on the investments they attract in sustainable energy projects. Increased demand for RECs is driving the development of more sustainable energy infrastructure, accelerating the transition away from fossil fuels and reducing greenhouse gas emissions from energy generation.
Conclusion: Offsets and RECs are valuable tools for organizations that cannot reasonably generate enough renewable energy on-site to be fully effective in achieving net-zero energy and greenhouse gas emissions. Critics who demand that every organization on site achieve net zero are wrong and are at best air thinkers or at worst simply ignorant when, for example, more than 90% of US businesses operate in space they lease in a building they do not own. These mechanisms provide accessible, scalable and credible means to support sustainable energy projects and verified emissions reduction initiatives, creating a positive impact on the environment and the fight against climate change.
Offsets and RECs are two powerful and complementary approaches to combating climate change and restoring the planet. As we collectively strive towards a sustainable future, embracing these tools will undoubtedly play a crucial role in shaping a greener and healthier planet.
A live webinar “Offsets and RECs for reducing your greenhouse gases” 30 Talking Points in 30 Minutes, Tuesday, August 15 at 9:00 am ET presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is free, but you must register here.