Strategies for Avoiding Lower-Quality Offset Credits

Renewable Energy

Renewable Energy projects include hydroelectric, wind, and photovoltaic solar renewable energy, solar hot water, and biomass power, and heat production projects, among others. Many renewable energy projects have high up-front capital costs, although they may offer high rates of return, and their operating costs are often minimal once built. However, legislative hurdles and local opposition to a project can complicate the implementation of such projects.

Renewable energy projects are crucial for the long-term protection of the global climate because they help us move away from fossil fuel-based electricity and heat production to more benign forms of energy production. Yet it is in many cases difficult or impossible to determine the additionality of such projects because renewable energy projects are revenue-generating, often otherwise subsidized, and the details of revenue and expenditure are complex.

Not all renewable power projects are benign. Hydropower projects, in particular, are controversial because they can have large negative environmental and social impacts. Several offset programs therefore require that hydro projects above a certain size comply with the World Commission on Dams (WCD) Framework, which outlines a framework for decision-making based on five core values: equity, sustainability, efficiency, participatory decision-making, and accountability.

Indirect emissions reductions

Renewable energy projects lead to so-called “indirect emissions reductions.” In other words, emissions are not reduced at the wind farm where the project occurs, but in the fossil fuel power plant which has to produce less power because of increased supply from renewable sources. Who then owns this emissions reduction? Is it the fossil fuel power plant or the wind farm? This is a particular concern for buyers of renewable energy project credits to be aware- see more in the Exclusive Claim to GHG Reductions section.

Renewable Energy Certificates (RECs) are sometimes converted to carbon offsets and sold in the voluntary market. Yet, this is deceptive because RECs are a different commodity and that are not associated with emission reductions except within a government regulatory mandate. To learn more about RECs and research revealing their lack of environmental integrity go here.