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  • Writer's pictureAnantaya Pornwichianwong

Carbon Credits VS Renewable Energy Certificates (RECs) : What are the differences?

Nowadays, heightened environmental awareness urgently prompts businesses to adopt conservation tools like carbon credits and Renewable Energy Certificates (RECs).

These mechanisms play a crucial role in addressing environmental issues across industries, and businesses should prioritize their implementation.

In this article, Sertis will explain the difference between carbon credits and RECs, their uses, and the business feasibility to ensure readers' understanding of these environmental mechanisms.

What are carbon credits?

Carbon credits are intangible rights generated through the reduction of greenhouse gas emissions in a given year. They embody a quantifiable and tradable value.

Typically, business activities result in the emission of greenhouse gasses, which can impact the environment. Each year, companies are subject to limits on the amount of greenhouse gasses they are allowed to emit.

If a company undertakes greenhouse gas reduction projects, such as afforestation or carbon capture and storage, to bring its emissions below specified limits, it can measure the reduction and convert it into carbon credits. Each ton of reduced greenhouse gasses can be converted into one carbon credit.

We can sell these credits to other companies, especially those that have exceeded their emission limits. Purchasing carbon credits enables them to legally emit additional greenhouse gasses while offsetting their overall carbon footprint.

Carbon credits, therefore, serve as a marketing instrument that incentivizes businesses to reduce their greenhouse gas emissions and generate profits from the resulting emission reductions.

What are Renewable Energy Certificates (RECs)?

Renewable Energy Certificates (RECs) act as evidence of renewable energy production derived from natural resources such as wind, sunlight, water, biomass, and biogas, known for their sustainability and minimal environmental impact. Each REC corresponds to 1 megawatt-hour (MWh) of generated renewable energy. There are two types of RECs: 1) Bundled RECs, which are sold alongside the associated energy, and 2) Unbundled RECs, which are sold separately without the associated energy.

Purchasing RECs means supporting the renewable energy market, thereby increasing demand for renewable energy and reducing environmental impact. RECs also allow businesses to legitimately claim the generation and utilization of renewable energy, contributing to environmental conservation and fostering an image of environmental responsibility.

Carbon Credit vs Renewable Energy Certificates

While both carbon credits and RECs contribute to reducing environmental impacts, they operate with distinct mechanisms and serve different purposes.

  • Purposes: Carbon credits are designed to support greenhouse gas emission reductions in industries, while RECs encourage renewable energy generation and broaden energy usage options for consumers.

  • Greenhouse gas emission reduction: Carbon credits can directly mitigate or offset emissions, whereas RECs indirectly contribute to emission reduction by incentivizing the generation of renewable energy as an alternative to fossil fuels.

  • Feasibility: Carbon credits are tradable across various industries, whereas RECs are primarily associated with the renewable energy and energy sectors.

Which kinds of businesses should purchase carbon credits and Renewable Energy Certificates?

Carbon credits

  • For businesses emitting a significant amount of greenhouse gasses with challenges in short-term emission reduction, purchasing carbon credits can offset these emissions.

  • Businesses seeking cost savings on environmental projects may find purchasing carbon credits a more economical option.

  • To comply with emission regulations or reduce emissions to meet specific limits, businesses can use carbon credits as a means of regulatory compliance.

  • Businesses committed to achieving carbon neutrality can use carbon credits to offset their emissions and progress towards their sustainability goals.

Renewable Energy Certificates

  • For businesses supporting renewable energy and seeking to reduce their carbon footprints by utilizing renewable energy, purchasing RECs is beneficial.

  • For businesses aspiring to achieve LEED certification, purchasing RECs can qualify you.

  • For businesses aiming for RE100 certification, purchasing RECs enables you to claim the use of renewable energy.

Technology is an essential factor that helps you succeed in transforming into an environmentally friendly business. Sertis is a leading energy solutions provider, utilizing AI and data to transform your organization into an environmentally responsible business, building a stable future for the community and beyond.

Learn more about Sertis' solutions for the energy sector:

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