Understanding Carbon Offsets

Renewable Energy

Compliance regulated and voluntary Renewable Energy Certificate (REC) markets exist in the United States, Europe and Australia. The former targets electric distribution utilities and the latter mainly large corporations to make voluntary sustainability claims. Some electric power utilities also offer green power pricing programs to customers through a premium on their bill.

RECs were originally developed to track renewable energy production for regulatory compliance with Renewable Portfolio Standards (RPSs). These standards require utilities to install and generate certain portion of their electricity with renewables.

The U.S. and some others governments also subsidize renewable energy investment and generation, which results in a surplus of RECs in some regions. Some of these surplus RECs are sold to organizations and individuals, who are told they are reducing emissions and buying green power.