How Effective & Efficient Are Renewable Energy Credits (RECs)? Here Are the Facts

How Effective & Efficient Are Renewable Energy Credits (RECs)? Here Are the Facts

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Grace Smoot

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Renewable Energy Credits (RECs) are one tool that can reduce global carbon emissions because they foster the switch to renewable energy, which has a lower carbon footprint than traditional fossil fuels. So, we had to ask, how effective and efficient are RECs?

Renewable Energy Credits (RECs) are effective and efficient as they reduce your own carbon emissions and bolster the renewable energy market. However, RECs can lack additionality, may have intermittent energy production problems associated with renewable energy, and do not guarantee carbon avoidance.

Keep reading to find out how efficient and effective Renewable Energy Credits (RECs) are, how you can offset your carbon footprint with RECs, what the pros and cons of RECs are, how RECs can mitigate climate change, and what better alternatives to RECs are. 

The Big Picture of the Effectiveness and Efficiency of Renewable Energy Credits (RECs)

Renewable Energy Credits (RECs) are a specific type of Energy Attribute Certificate (EAC), physical documentation that proves 1 megawatt-hour (MWh) of renewable energy has been added to the energy grid. EACs go by different names in different regions of the world. RECs simply refer to EACs in North American markets.

REC: a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes of renewable electricity generation”

United States Environmental Protection Agency

RECs are the currency of the renewable energy market in North America, representing the attributes of renewable energy that are generated and delivered to our power grid. They are measured in megawatt hours (MWh) of renewable electricity and target scope 2 emissions, or the emissions associated with purchased electricity. 

RECs can come in two forms:

  • Bundled: The REC is sold together with the energy associated with it.
  • Unbundled: The REC has been separated from the physical electricity it represents.

They act as an accounting or tracking mechanism for renewable energies as they are incorporated into our power grid. Because we cannot distinguish energy generated from renewables and that produced by other sources, some form of tracking is required. To prevent someone else from claiming it, each REC can be uniquely numbered, tracked, and retired in the tracking system.

How Do Renewable Energy Credits (RECs) WorkRenewable Energy Credits (RECs) are physical documentation that proves 1 megawatt-hour (MWh) of renewable energy has been added to the energy grid.
RECs reduce carbon emissions by increasing the amount of renewable energy entering our power grid.
And renewable energy has a lower carbon footprint than traditional fossil fuels (e.g., coal, oil, natural gas). 
How Effective Are Renewable Energy Credits (RECs) at Mitigating Climate ChangeRECs reduce your own carbon emissions
RECs bolster the renewable energy market
RECs often lack additionality
How Efficient Are Renewable Energy Credit (REC) Programs at Reducing CO2 EmissionsRECs are cost-effective
RECs increase the efficiency of the power grid
RECs may have intermittent energy production problems associated with renewable energy

RECs focus on incorporating new renewable energy into our energy grid, which has a lower carbon footprint than traditional fossil fuels. RECs vary in effectiveness and efficiency due to limitations involving additionality.

Related: Are you interested in learning more about the big picture of renewable energy credits (RECs)? Check it out in this article here: “What Are Renewable Energy Credits (RECs) and How Do They Work? The Big Picture

Here’s How Effective and Efficient Renewable Energy Credits (RECs) Are

In terms of effectiveness, renewable energy credits (RECs) reduce your own carbon emissions and bolster the renewable energy market. However, they often lack additionality.

In terms of efficiency, renewable energy credits (RECs) are cost-effective and increase the efficiency of the power grid. However, they also may have intermittent energy production problems associated with renewable energy.

How Effective Are Renewable Energy Credit (REC) Programs at Reducing CO2 Emissions

Effectiveness involves completing a task with a desired outcome, typically a successful one. 

Effective: producing the result that is wanted or intended; producing a successful result

Oxford Dictionary

Renewable Energy Credits (RECs) are effective because they reduce your own carbon emissions and bolster the renewable energy market. However, they often lack additionality.

Renewable Energy Credits Reduce Your Own Carbon Emissions

RECs generate environmental benefits thanks to their lower carbon footprint in comparison to energy produced by burning fossil fuels. When you purchase a REC, you source your energy from renewable resources rather than from fossil fuels. And since renewables have a lower carbon footprint than fossil fuels, your carbon footprint decreases as you use RECs.

The carbon footprint of renewable energy ranges anywhere from 11 (onshore wind) to 740 (biomass) grams of CO2 equivalent per kWh (gCO2/KWh) of electricity produced. This is significantly lower than the 970, 820, and 490 gCO2/KWh emitted by oil, coal, and natural gas, respectively. 

Illustration of CO2 equivalent per energy source
World Nuclear Association: Average life-cycle CO2 equivalent emissions

However, although RECs reduce your own carbon footprint, they do not guarantee carbon avoidance. 

  • RECs bolster the renewable energy market and increase renewable energy supply to the power grid, but they do not curtail energy from fossil fuels or limit their production
  • This is because RECs allow purchasers to write off their carbon emissions without requiring them to reduce their current emissions.

In short, RECs reduce your own carbon emissions, but they do not necessarily guarantee carbon is being avoided. You can think of purchasing RECs as supporting renewable energy rather than curtailing fossil fuels.

Renewable Energy Credits Bolster the Renewable Energy Market

The goal of RECs is to reduce carbon emissions to mitigate climate change while promoting new, renewable energy creation. RECs represent the creation of new renewable energy to be supplied to our power grid. They can reduce the demand for “dirty”, fossil-fueled energies and increase the demand for renewable energies, bolstering the market.

However, one main problem with RECs is that the market is oversaturated due to the thundering success of the renewable energy market. And RECs are now so cheap to buy that they are not a big enough revenue source to make a difference on a large power project. 

In short, RECs increase the demand for renewable energy which in turn bolsters the renewable energy market. But low prices and high demand have led to an oversaturated market. 

Renewable Energy Credits Often Lack Additionality

To be beneficial, RECs must be additional. This means the carbon emissions reductions would not have occurred without REC interventions. 

But RECs are often not additional because most projects receiving REC revenue now would have been built regardless. Driven by decreasing costs and improved technology, renewable energy capacity grew 3.7-fold from 2000-2020, increasing from 754 gigawatts (GW) to 2,799 GW. The large demand for renewable energy in general means that the infrastructure would have been built independently of RECs. 

In short, additionality is not guaranteed with RECs because renewable energy projects are already in high demand and would have been built regardless.

How Efficient Are Renewable Energy Credit (REC) Programs at Mitigating Climate Change

Efficiency involves performing a task while using the least amount of resources and producing the least amount of waste possible.

Efficient: working in a way that does not waste a resource (= something valuable such as fuel, water, or money)

Cambridge Dictionary

Renewable Energy Credits (RECs) are efficient because they are cost-effective and increase the efficiency of the power grid. However, they also may have intermittent energy production problems generally associated with renewable energy.

Renewable Energy Credits Are Cost-Effective

Historically, RECs have been a cost-effective way of reducing carbon emissions. Green-e®, the governing body that tracks and retires certified RECs in North American markets, saw a price jump from $0.50 to $8 per REC in recent years. But this is still cheaper than direct carbon capture offsets which can cost anywhere from $250-$650 per ton and reforestation efforts which cost approximately $50 per ton

RECs are also certified proof that you are using renewable energy without you having to install the required infrastructure, which saves you money in the long run. For example, solar panels can cost anywhere from $15-25,000 to install, and they require routine cleaning to ensure optimal performance. But with RECs, you can claim your energy came from solar energy without having to install the required infrastructure. 

In short, RECs are a relatively cost-effective method of carbon emission reduction when compared to other methods. 

Renewable Energy Credits Increase The Efficiency Of The Power Grid

RECs promote decentralization of our energy supply which increases power grid efficiency by reducing peak time usage and decreasing the likelihood of power outages. 

The traditional grid works something like this:

  1. Power plants generate electricity
  2. Transformers step up voltage for transmission
  3. Transmission lines transport electricity over long distances
  4. Neighborhood transformer steps down voltage
  5. Transformers on poles step down electricity before it enters homes

Our traditional grid worked fine in the past when energy demand was much lower, but globally our electricity usage is steadily increasing, and renewable energy makes up an increasingly bigger share of our total energy consumption. 

RECs draw renewable energy from various geographic locations, so the grid can distribute power from multiple plants. Although the addition of large amounts of renewable energy to the grid at one time may seem like it would have a destabilizing effect, renewable energy actually becomes more predictable as it is added to the grid. This is thanks to the law of large numbers

Law of large numbers: as the number of identically distributed, randomly generated variables increases, their sample mean (average) approaches their theoretical mean.”

Britannica

In terms of renewable energy, the output of every wind turbine and solar panel that is connected to the power grid Is less volatile and more stable than the output of one individual generator. This decentralization in turn reduces peak time usage and decreases the likelihood of power outages. It also increases the efficiency of power production and power distribution.

In short, renewable energy can be sourced from various geographical locations which helps increase the efficiency of the global power grid.

Renewable Energy Credits May Have Intermittent Energy Production Problems Associated With Renewable Energy

Because RECs are sourced from renewable energy, they also share some of the same drawbacks as renewable energy. These include intermittent energy production, geographic limitations, and ever-fluctuating quantities of energy being produced

Different renewable energy sources are abundant in different regions of the world, and some are only generated at certain times of the day. For example, solar energy can only be produced when the sun is shining, geothermal energy requires siting of power plants where thermal reservoirs are located, and wind energy can only be produced when winds reach a certain speed. 

But the main problem is that our current grid was designed and operates around the concept of large, controllable electric generators. Because of this, the grid has a very limited storage capacity. The intermittency of renewable energy disrupts the traditional power grid, forcing it to adjust its normal operating procedures. 

Three ways to combat these problems and integrate renewable energy into the grid on a large scale are:

  1. The law of large numbers: This law states that as the number of processes increases, the aggregate result becomes more predictable. When applied to renewable energy, this means that the combined output of every solar panel and wind turbine added to the energy grid is less volatile (and more stable) than the output of an individual generator. Rather than destabilizing the power grid, the addition of more renewable energy has a stabilizing effect.
  1. The power of prediction: Predicting the level of expected renewable energy generation over the course of a day is difficult, but we now have the technology to model natural systems (e.g., wind and sun) and forecast them ahead of time. 
  1. Incentivizing energy production at the right time and place: Predicting the amount of renewable energy that will be available in a few day’s time is even more difficult than predicting a few hours out. Integrating large amounts of renewable energy into the grid will require a mix of renewable sources that complement each other to equal the total energy demand over the course of a day. 

In short, RECs share some of the potential intermittent energy production problems associated with renewable energy. But technology, predictions, and finding the right energy mix can combat these drawbacks.

How Could You Offset Your Own Carbon Footprint With Renewable Energy Credits (RECs)

Unbundled RECs have seen rapid growth in the past decade, increasing from 19.8 million MWh in 2010 to 86.4 million MWh in 2020, and they are now the most common form of green-power procurement in the voluntary market.

Because RECs are cost-effective and directly reduce your own carbon emissions, they are predicted to make up an increasingly larger share of this market.

Renewable Energy Credit (REC) CompanyQuick Facts
TerrapassTerrapass offers RECs that support renewable energy projects such as wind and solar farms.
South PoleSouth Pole offers RECs that support renewable energy projects including geothermal, small hydropower, and solar.
ClimeCoClimeCo’s RECs are sourced from a variety of renewable energy resources and can be purchased on a commercial or wholesale basis anywhere in the US.
3Degrees3Degrees offers RECs that support renewable energy projects including solar projects in Uganda, Kentucky, and Massachusetts. 
Native EnergyNative Energy offers RECs that support wind, solar, wind/ solar hybrids, landfill gas, small-scale hydro, and biomass renewable energy projects across the US.
Act CommoditiesAct offers Renewable Energy Quota Certificates (REQCs) for purchase on the mandatory market and Energy Attribute Certificates (EACs), which includes RECs, for purchase on the voluntary market.
Bonneville Environmental FoundationBonneville Environmental Foundation offers RECs that support wind and solar renewable energy projects. They also offer stacked RECs. 
Anew EnvironmentalAnew Environmental offers RECs that support renewable energy projects such as wind and solar farms.
GO2 MarketsGO2 Markets offers wind, solar, biomass, hydro, thermal, and geothermal RECs dependent on the geographic location of your energy consumption.
Related: Are you interested in learning more about the best renewable energy credits (RECs)? Check out the full article here: “Best Renewable Energy Credits (RECs)

What Are The 6 Pros and 4 Cons of Renewable Energy Credits (RECs)

Renewable energy credits (RECs) reduce your own carbon emissions, bolster the renewable energy market, are cost-effective, promote the decentralization of our energy supply, are a low-maintenance form of carbon emission reduction, and are environmentally-friendly.

However, RECs often lack additionality, do not guarantee carbon avoidance, occupy an oversaturated market, and may have intermittent energy production problems associated with renewable energy.

Related: Are you interested in learning more about the pros and cons of renewable energy credits (RECs)? Check out the full article here: “Renewable Energy Credits (RECs): All 6 Pros and 4 Cons Explained

What Are the 6 Pros of Renewable Energy Credits (RECs)

RECs have various pros that go beyond simply reducing carbon emissions, they also contribute largely to the advancement of the renewable energy market.

6 Pros of Renewable Energy Credits (RECs)Quick Facts
#1: RECs reduce your own carbon emissionsWhen you purchase a REC, you source your energy from renewable resources rather than from fossil fuels. Since renewables have a lower carbon footprint than fossil fuels, your carbon footprint decreases as you use RECs.
#2: RECs bolster the renewable energy marketRECs represent the creation of new renewable energy to be supplied to our power grid. They can reduce the demand for “dirty”, fossil-fueled energies and increase the demand for renewable energies, bolstering the market.
#3: RECs are cost-effectiveRECs certified by Green-e®, the governing body that tracks and retires certified RECs in North American markets, cost approximately $8 per REC, which is cheaper than direct carbon capture ($250-$650 per ton) and reforestation ($50 per ton). 
#4: RECs promote the decentralization of our energy supplyRECs draw renewable energy from various geographic locations, so the grid can distribute power from multiple plants. This decentralization in turn reduces peak time usage and decreases the likelihood of power outages.
#5: RECs are a low-maintenance method of carbon emission reduction With RECs, the purchaser does not have to maintain any renewable energy infrastructure, making them a low-maintenance form of carbon emission reduction that can incentivize the switch to renewables even more.
#6: RECs are environmentally-friendly RECs are sourced from renewable energy sources, which each come with their own set of environmental benefits. Biomass is less environmentally-friendly than the other 6 renewable energy sources.

What Are the 4 Cons of Renewable Energy Credits (RECs)

Understanding the drawbacks of RECs is important when implementing this strategy on a large scale in order to mitigate climate change.

4 Cons of Renewable Energy Credits (RECs)Quick Facts
#1: RECs often lack additionalityRECs are often not additional because most projects receiving REC revenue now would have been built regardless.
#2: RECs do not guarantee carbon avoidanceRECs bolster the renewable energy market and increase renewable energy supply to the power grid, but they do not curtail energy from fossil fuels or limit their production. RECs allow purchasers to write off their carbon emissions without requiring them to reduce their current emissions.
#3: RECs occupy an oversaturated marketOne main problem with RECs is that the market is oversaturated due to the thundering success of the renewable energy market, and RECs are now so cheap to buy that they are not a big enough revenue source to make a difference on a large power project. 
#4: RECs may have intermittent energy production problems associated with renewable energyBecause RECs are sourced from renewable energy, they also share some of the same drawbacks as renewable energy. Different renewable energy sources are abundant in different regions of the world, and some are only generated at certain times of the day.

How Can Renewable Energy Credits (RECs) Help Mitigate Climate Change

Climate change is a severe and long-term consequence of fossil fuel combustion. Renewable Energy Credits (RECs) can help mitigate climate change because they increase the market for renewable energy and incentivize the switch away from traditional fossil fuels, which emit billions of tons of carbon every year. Atmospheric carbon can remain in circulation for tens of thousands of years and exacerbate the negative effects of climate change.

How is Climate Change Defined

Climate change is arguably the most severe, long-term global impact of fossil fuel combustion. Every year, approximately 33 billion tons (bt) of CO2 are emitted from burning fossil fuels. The carbon found in fossil fuels reacts with oxygen in the air to produce CO2

Climate change: changes in the earth’s weather, including changes in temperature, wind patterns and rainfall, especially the increase in the temperature of the earth’s atmosphere that is caused by the increase of particular gasses, especially carbon dioxide.

Oxford Dictionary

Atmospheric CO2 fuels climate change, which results in global warming. When CO2 and other air pollutants absorb sunlight and solar radiation in the atmosphere, it traps the heat and acts as an insulator for the planet. Since the Industrial Revolution, Earth’s temperature has risen a little more than 1 degree Celsius (C), or 2 degrees Fahrenheit (F). Between 1880-1980 the global temperature rose by 0.07C every 10 years. This rate has more than doubled since 1981, with a current global annual temperature rise of 0.18C, or 0.32F, for every 10 years. 

As outlined in the 2015 Paris Climate Agreement, we must cut current GHG emissions by 50% by 2030 and reach net zero by 2050

How Do Renewable Energy Credits (RECs) Generally Help Mitigate Climate Change

Levels of carbon in our atmosphere that cause climate change have increased as a result of human emissions since the beginning of the Industrial Revolution in 1750. The global average concentration of carbon dioxide in the atmosphere today registers at over 400 parts per million. RECs can help prevent these levels from increasing even more.

When you hear the word “REC”, think about the term “renewable energy”. RECs represent the creation of renewable energy to be supplied to our power grid. RECs can reduce the demand for “dirty”, fossil-fueled energies by bolstering the renewable energy market. 

RECs that are certified by verified third parties and are a part of renewable energy projects that are carried out until the end of their lifespan have the best chance of reducing carbon emissions and therefore mitigating climate change. 

When we reduce CO2 emissions we also slow the rate of global temperature rise, which in turn minimizes the effects of climate change. 

How Do Renewable Energy Credits (RECs) Specifically Help Mitigate Climate Change

Renewable energy credits specifically help mitigate climate change because they bolster the renewable energy market, which reduces the demand for fossil fuels and subsequently reduces carbon emissions.

Renewable energy is important to meet Paris Climate Agreement targets because it reduces our dependence on fossil fuels, which produce carbon that can remain in our atmosphere for tens of thousands of years.

What Are Better Alternatives to Renewable Energy Credits (RECs)

If used correctly, renewable energy credits (RECs) can provide environmental, economic, and social benefits beyond reducing carbon emissions. They have the potential to instigate meaningful environmental change and begin to reverse some of the effects of climate change. 

However, we can’t let this method be a guilt-free way to reduce carbon emissions. Relying on RECs solely is impractical because they are so cheap that they have become irrelevant to the financing and investment decisions of the power industry. Instead, RECs must be used in conjunction with direct carbon reduction measures. 

These reduction measures don’t have to involve drastic changes either. Actions that may seem small can have a big impact because those small changes add up! You can reduce your carbon footprint in three main areas of your life: household, travel, and lifestyle. 

Reduce your household carbon footprint:

Reduce your travel carbon footprint:

  • Walk or bike when possible: The most efficient ways of traveling are walking, bicycling, or taking the train. Using a bike instead of a car can reduce carbon emissions by 75%. These forms of transportation also provide lower levels of air pollution.

Reduce your lifestyle carbon footprint:

  • Switch to renewable energy sources: The six most common types of renewable energy are solar, wind, hydro, tidal, geothermal, and biomass energy. They are a substitute for fossil fuels that can reduce the effects of global warming by limiting global carbon emissions and other pollutants.
  • Recycle: Recycling uses less energy and deposits less waste in landfills. Less manufacturing and transportation energy costs means fewer carbon emissions generated. Less waste in landfills means less CH4 is generated.
  • Eat less meat and dairy: Meat and dairy account for 14.5% of global GHG emissions, with beef and lamb being the most carbon-intensive. Globally, we consume much more meat than is considered sustainable, and switching to a vegan or vegetarian diet could reduce emissions. 
  • Take shorter showers: Approximately 1.2 trillion gallons of water are used each year in the United States just for showering purposes, and showering takes up about 17% of residential water usage. The amount of water consumed and the energy cost of that consumption are directly related. The less water we use the less energy we use. And the less energy we use, the less of a negative impact we have on the environment.

Because the market for RECs is oversaturated and they do not curtail fossil fuel production, RECs alone will not be enough to reduce global carbon emissions significantly. Reducing individual energy use and consumption is a better alternative to RECs. 

Related: Are you interested in learning why reducing your carbon footprint is so important? Check it out in this article here: “4 Main Reasons Why Reducing Your Carbon Footprint Is Important

Final Thoughts

Renewable Energy Credits (RECs) are effective because they reduce your own carbon emissions and bolster the renewable energy market; however, they often lack additionality.

RECs are efficient in the sense that they are cost-effective and increase the efficiency of the power grid; however, they also may have intermittent energy production problems associated with renewable energy.

RECs can instigate meaningful change, but they should not be seen as the only solution to climate change. They reduce your own carbon emissions and bolster the renewable energy market, but in the long term, market oversaturation and low prices limit their long-term effectiveness.

When used in conjunction with direct CO2 reduction measures, RECs can be much more effective. We should reduce our own carbon footprint as much as possible first, and only then rely on RECs.

Stay impactful,

Illustration of a signature for Grace



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Grace Smoot

Grace loves to research and write about all things related to climate action and sustainability. She holds a Bachelor’s degree in Environmental Biology and works as an Environmental Survey Technician. Outside of work, she loves to work out, play soccer, and take her dog for long walks.

Did you know that the internet is a huge polluter of the environment? But fortunately not this site. This site is powered by renewable energy and all hosting-related CO2 emissions are offset by three times as many renewable energy certificates. Find out all about it here.

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