Renewable Energy Certificates (RECs), are non-tactile energy commodities that represent proof that one megawatt hour (MWh) of electricity was generated from an eligible renewable energy resource such as solar and wind stations. These certificates can be traded, sold or bartered, allowing the current owner of the certificate to claim they have purchased renewable energy.
Traditional carbon offsetting serves two types of markets; those who wish to be compliant with the law and those who wish to offset their own personal use. While carbon offsetting works well for individuals, utility companies often purchase carbon credits at prices that provide little incentive for them to alter their business practices. The cost of these carbon offsets are often created by the government and generally are favorable to corporations.
The advantage of Renewable Energy Certificates versus traditional carbon offsetting is simple. While carbon offsetting works to promote lower emissions through government issued carbon offsets and penalties, renewable energy certificates use market fluctuations to generate larger subsidies for new technologies. Under a renewable energy certificate program, a green energy provider is credited with one certificate for every one thousand kilowatts of electricity they produce. Not only does the energy get fed into the grid, the accompanying REC can now be sold on the open market. As the profit goes directly to the green energy company, it can use the money to fund better and more advanced ways of collecting renewable energy. The buyer of the REC only receives the certificate.
Ultimately, the dynamic pricing of the renewable energy certificate brings more funding to renewable energy companies. Since many states are in the process of instituting specific REC requirements, many carbon emitters will be forced to purchase renewable energy certificates in order to comply with the law. As the owner of these certificates, a green energy company can sell these certificates at a much higher cost, which will buoy the profitability of renewable energy as well as motivate greenhouse gas emitters to shift their technological focus. With a government carbon offsetting plan, the polluting company can simply pay for carbon credits at a value significantly lower than what the market demands.
As a consumer looking to achieve true carbon neutrality, carbon offsetting isn’t a perfect long term answer to the problem of global warming. Renewable Energy Certificates, backed by government regulations, can incentivize the market into buying from these sources. It can also inflate the value of solar and wind power, making it far more profitable than fossil fuels or coal. By tipping the playing field, it can ultimately make corporations and individuals alike purchase them in order to increase their profits, as well as invest in new innovations to help maximize their overall renewable energy yield.