Renewable energy use: What can we claim?

In November 2016, more than 350 U.S. businesses actively endorsed the historic Paris Climate Agreement. A low-carbon future for the United States requires ambitious climate and energy use commitments across industries.

How can businesses, institutions, non-profits and government agencies ensure claims on carbon reduction and renewable energy use are accurate and credible?

Here is how to disentangle the threads of renewable energy claims in the U.S.

rec-claimsWhat is a REC?

Customers, stakeholders and shareholders require verifiable information that underpin renewable energy usage claims. The U.S. Federal Trade Commission (FTC) has issued Green Guides to help marketers ensure that the claims they make about the environmental attributes of their products and companies are truthful and non-deceptive.

In the U.S., an organization must own and retire Renewable Energy Certificates, or RECs, to make a public claim of using renewable energy.

A REC is a tradable property right in the United States which represents the environmental and social benefits associated with the generation of 1 Megawatt-hour (MWh) of renewable energy.

These benefits include emissions-free electricity (embodying zero-emission electrons and avoided emissions from displaced fossil generation), reduced pollution (e.g. particulate matter, volatile organic compounds (VOCs), mercury and other pollutants), local job creation, and “soft” attributes such as diversifying the fuel mix and contributing to a more sustainable energy system.

However, a REC is not associated with a pre-defined amount of CO2 reductions. There are two key reasons:

1. There is no carbon cap regulation or market in the U.S. that assigns wind or solar projects property rights to any carbon reductions; and

2. The U.S. electricity grid works as an interconnected network where grid operators dispatch fossil, nuclear and renewable power generation assets simultaneously to meet electricity demand. This makes it difficult to identify the specific carbon-emitting energy resource displaced – and hence the specific quantity of CO2-equivalent (CO2e) of emissions reduced – when renewable energy enters the grid. We do know, however, that as more renewable energy is placed on the grid it makes the overall electricity-generating fuel mix cleaner.

The electrical grid must be in constant balance and all electrons have the same properties despite their underlying generation source. It is extremely difficult to know with certainty if one power plant is being turned off or kept off due to the generation of renewable power. It is therefore not feasible to quantify with absolute real-time precision how much less CO2-equivalent emissions are being avoided as a result of the renewable energy project. Hence, a REC does not represent an exact “offset” of emissions.

Instead of CO2 reduction claims, organizations can use RECs, which they own and retired, to reduce the amount of MWhs of carbon-emitting purchased electricity accounted for as scope 2 emissions in their carbon disclosure reports. The GHG Protocol provides specific Scope 2 guidance on how corporations measure these emissions. RECs cannot be applied against direct emissions from sources that are owned and controlled by the reporting company (which would be scope 1 emissions).

RECs allow your organization to primarily make a public renewable energy usage claim. To claim that your REC-supported renewable energy purchase also avoided emissions by displacing dirtier electricity production requires a nuanced look at the emissions factor at the renewable project location. Green-e certified RECs require standards to ensure minimum quality levels such as to avoid double-counting, and hence allow an organization to make robust claims.

A REC is not the same as a Carbon Allowance or Carbon Offset

A carbon allowance is a quantity of greenhouse gases that you are allowed to emit; it is essentially a “right to pollute”. Carbon allowances are used in compliance markets (e.g. Cap-and-Trade), where there is a cap on the amount of CO2 that can be emitted by a market economy, sector, etc., depending on the regulation itself. For example, the carbon cap in the European Union is economy-wide, covering all sectors, while the cap in the US northeastern states (part of the Regional Greenhouse Gas Initiative) applies only to the power sector. A carbon allowance is not a carbon offset.

A carbon offset, meanwhile, is a quantity of greenhouse gas reductions (measured in metric tons of CO2e that result from a discrete project. Carbon offsets are primarily used in voluntary markets, in which organizations buy offsets to mitigate or offset their carbon footprint, their overall GHG emissions.

Offsets allow you to lower your carbon footprint (such as Scope 1 emissions) without actually lowering the emissions associated with your business operations. Offsets can also be used as allowances in compliance markets.

Offsets result from current projects and are not investments in future projects. They are “real, verified and permanent GHG emissions reductions” that can be discretely measured, reported, and verified by a qualified third party (Green-e Climate).