Clean Energy Purchasing FAQ

A Renewable Energy Certificate (REC) or Guarantee of Origin (GO) is simply a recording of information created to document the fact that one megawatt-hour of electricity is generated and supplied (net) to the shared electrical grid through the use of specified and eligible renewable energy resources. No clear definition exists beyond this fundamental characteristic, although most definitions present some form of broader, yet ambiguous, claim regarding intangible “green” or “renewable” attributes. Some of these certificates may be used for regulatory compliance purposes by electric utilities, while in the United States a large residual is offered for sale to a voluntary market of corporate and other consumers with the marketing message that their purchase is equivalent to “buying green power”.

In practice, a wide range of REC and GO definitions exist across green power marketers, regulations, legislation, and non-governmental certification organizations. Many of these definitions make reference to some manner of “attributes” or “benefits”, using terms like “green” and “renewable.”¹

Originally, and appropriately, RECs were designed as a tool to track compliance with Renewable Portfolio Standard (RPS) (i.e., electric utility quotas for the supply of a minimum amount of renewable energy to the grid) regulations, while allowing electric utilities (i.e., Load Serving Entities) the flexibility of trading to facilitate more cost-effective industry-wide compliance. RECs used for RPS compliance in the United States must meet definitions and eligibility requirements that differ by jurisdiction, resulting in dozens of different types of compliance certificates. In all regulatory cases, though, RECs (USA) and GOs (Europe) are not used by governments to imply power is being physically transacted, but instead these certificates are used as a tradable regulatory compliance tracking instrument.

Voluntary market RECs and GOs, on the other hand, have been claimed by electricity end users (i.e., companies and individual customers of electric power companies) to represent the purchase of electrical energy from specific renewable energy generators, despite the reality that delivery of renewable energy to the grid is not necessarily contingent on their purchase.

¹Gillenwater, M. (2008). Redefining RECs (Part 1): Untangling attributes and offsets. Energy Policy.

Outside the context of an electric utility’s regulatory compliance under an RPS, it is not clear that you are buying anything. Formally, you are paying for a certificate that records the generation of one MWh of electricity from a qualified renewable resource. However, you are not purchasing, taking possession of, or using “electricity” simply by purchasing a REC or GO. Further, you are not buying zero-emissions power or avoided emissions.

A REC or GO is not a purchase of green power (and you are not buying “electrons” as commonly suggested¹). RECs and GOs are a form of financial contract that takes place independently of electricity distribution and consumption physics; there is no system that can track (see Does buying a REC or GO mean I am using renewable energy?) the origin of electricity on the consumption side of a pooled electrical transmission and distribution grid.

Instead, the common marketing language associated with RECs and GOs is that they “represent” environmental, green, or renewable “attributes” or “benefits” associated with renewable energy generation. See What are the “environmental benefits” or “attributes” associated with RECs and GOs? for what is an “attribute”. In economics terminology, you are not clearly buying a good or a service. Instead, economically speaking, you are making a financial contribution to a company producing electricity with renewable resources, which then begs the question of whether that donation has a beneficial impact. (see Does buying a REC or GO mean I am using renewable energy?)

Green-e® claims in their Code of Conduct that “Renewable Energy Certificates (REC) do not contain electricity. REC represents the environmental benefits of 1 megawatt hour (MWh) of renewable energy that can be paired with electricity”(Green-e® Code of Conduct, p27, 11 December 2020). Yet, in its marketing materials, Green-e® also states that “RECs are used to demonstrate use of renewable electricity in the U.S.” (CRS, 7 March 2016). This type of confusing, and frequently misleading, language is ubiquitous across voluntary green power marketing materials.

¹Gillenwater, M. (2013). Is the way you think about emissions from purchased electricity wrong? Greenhouse Gas Management Institute, February 2013. https://ghginstitute.org/2013/02/26/is-the-way-you-think-about-emissions-from-purchased-electricity-wrong/

No. There is no physical traceability of the renewable energy from point of generation to end-use consumption in a pooled grid. Transactions of RECs or GOs do not alter this physical reality. Nor are these certificates a credible proxy for tracking or allocating generator-specific indirect emission factors for purchased electricity.

To put this question more precisely: Am I purchasing and/or consuming electricity from renewable energy generation when I purchase and retire a REC or GO?

Physically, the answer is clearly no. RECs, GOs, or any other contractual arrangements intended to claim “green power” procurement are, at best, an invented proxy for using renewable energy. The question, then, is do these certificates or other contractual instruments provide a technically credible proxy for GHG and other environmental accounting applications, such as conveying an exclusive claim to a generator-specific indirect emission factor (hint, the answer is no).

First, even if you are buying RECs or GOs, for every MWh of your electricity consumption, you are most likely dependent on the availability of other non-renewable generation resources (e.g., fossil and nuclear) to provide your reliable and continuous electricity supply.

Second, these certificates record each MWh of electricity generated (i.e., injected to the shared transmission and distribution grid) from participating renewable generators. But, there is a difference between the quantity of electricity generated and the quantity consumed on a grid. The difference is losses, due mainly to transmission and distribution (e.g., typically 5 to 10% in the USA and Europe, although it can be much larger in some countries). For example, the generation associated with a record of 100 RECs in a certificate registry would correctly only correspond to 90 MWh of electrical load (i.e., with a 10% loss factor).

No, RECs and GOs are not appropriate for either attributional or consequential GHG accounting. For detailed explanation of these terms, see GHGMI’s definitions.

The marketing around RECs and GOs is the source of much confusion and misleading statements. For example, Green-e® offers confusing guidance on whether REC purchases actually reduce emissions:

“Participants may make statements about avoided grid GHG emissions in association with the renewable energy generation or the supply used for the renewable energy product. However, they must not imply a causal link between the purchase of renewable energy and avoided emissions (i.e. that purchases result in generation or avoided grid emissions). To calculate avoided grid GHG emissions in regions without a cap-and-trade program covering the electricity sector, participants must use the marginal non-baseload emissions rate.” (Green-e® Code of Conduct, p29, 11 December 2020).

The fact is that RECs and GOs are neither a sound basis for corporate/organizational GHG emission inventories (i.e., “carbon footprints” as a form of attributional environmental accounting) nor are they in any way an appropriate tool for avoided emission claims, such as those made through carbon credits to “offset” GHG emissions (i.e., as a form of consequential environmental accounting).¹

¹Brander, M. (2021). The most important GHG accounting concept you have never heard of: the attributional-consequential distinction. Seattle, WA. Greenhouse Gas Management Institute, April 2021. https://ghginstitute.org/wp-content/uploads/2021/04/Consequential-and-Attributional-Accounting-April-2021.pdf

RECs and GOs are not a sound basis for carbon footprinting (attributional accounting). RECs and GOs transactions do not entail physical and exclusive delivery of electrical energy from a renewable energy generator to an organization’s facilities (see What is a “green power purchase”?). Therefore, these transactions have no bearing on the emissions physically attributable to an organization’s electricity consumption (i.e., its “carbon footprint”).

An organization’s carbon footprint is an accounting of physically quantifiable GHG emissions (and removals) to and from the atmosphere that result from the entity’s activities within defined boundaries. This quantification is a form of attributional environmental accounting. The purchase of RECs, GOs, and other green power contractually-based purchase claims, are not appropriate instruments for attributing GHG emissions that physically result from an organization’s activities. RECs and GOs are financial instruments and neither change nor represent the physical and exclusive delivery of electrical energy to your organization’s facility. Specifically, the use of an indirect (Scope 2) emission factor based on a REC or GO claim is flawed and misleading as part of an organization’s carbon footprint.¹

¹Open letter rejecting the use of contractual emission factors in reporting GHG Protocol Scope 2 emissions (2015). Available here: https://scope2openletter.wordpress.com

No, it has been established that the voluntary markets for RECs and GOs do not influence investments in renewable energy generation capacity, nor do they induce greater energy output from existing renewable generation capacity. They, therefore, cause no emissions to be avoided.¹

RECs and GOs are not appropriate for tracking or representing physical procurement of energy (or vaguely defined “environmental benefits” (see What are the “environmental benefits” or “attributes” associated with RECs and GOs?); they are instead simply a record that generation of electricity occurred which is converted into a tradable instrument for regulatory compliance purposes by electric utilities (not end-use consumers). Claiming to have caused avoided emissions must be based on a consequential GHG accounting analysis.

Confusion and mistakes in the use of RECs and GOs are unfortunately fostered by institutions like the U.S. EPA, which defines these certificates as avoided emission instruments used to lower an organization’s market-based Scope 2 emissions while also acknowledging that no consequential (i.e., additionality) analysis is required to support this claim or to report use of green power. This all too common language problematically conflates attributional and consequential GHG accounting.²

Companies are not properly considered carbon neutral with respect to their indirect emissions as long as their purchased electricity is supplied in some significant part by GHG emitting generation resources. Green-e® acknowledges that their certificates and other products should not be used for “carbon neutrality” claims:

“The Green-e® Energy program does not support or endorse claims of carbon neutrality. Carbon-neutral claims may not be made about or in relation to Green-e® certified products.” Green-e® Code of Conduct, p27 (11 December 2020).

In developing an organization’s GHG inventory, it is incorrect to use RECs or GOs as the basis to a claim to zero indirect emissions associated with purchased electricity (see Should RECs or GOs be used for GHG emissions accounting?).

¹Evidentiary resources and literature available here: https://www.bccas.business-school.ed.ac.uk/impact-and-collaboration/renewable-energy-purchasing/

²Brander, M. (2021). The most important GHG accounting concept you have never heard of: the attributional-consequential distinction. Seattle, WA. Greenhouse Gas Management Institute, April 2021. https://ghginstitute.org/wp-content/uploads/2021/04/Consequential-and-Attributional-Accounting-April-2021.pdf

No, because voluntary market RECs or GOs do not influence renewable energy generation or investment, nor are they appropriate instruments for attributional environmental accounting (see Should RECs or GOs be used in carbon footprinting?). The proximity of the generator does not alter this fact. Certificate labeling rules vary, but in general, the practice of non-local purchasing of certificates is allowed, including by Green-e® and the GHG Protocol’s Scope 2 guidance.¹

¹For example, a REC purchase associated with a wind farm in Texas may be claimed by a company in Canada or Alaska.

No. “Residual mix” refers to the mix of generation supplying the electrical grid minus the generation from specific generators that are exclusively claimed by individual retail consumers as supplying their electricity. The mix of generation after these exclusive claims are removed is referred to as a residual. A residual mix average emission factor can be calculated based on the assigned generation.

The practice of utilizing RECs or GOs to estimate Scope 2 emissions for an entity, even when done in combination with a “residual mix” grid emission factors, is a practice of shifting allocation of emissions among entities (i.e., reallocating the indirect emissions from fossil fuel-fired generation on the grid to other entities). This reallocation misrepresents the actual upstream indirect emissions associated with an entity’s physical consumption of electricity, and thereby undermines credibility and purpose of attributional GHG emission inventories.¹

Note, even the available residual mix emission factors in the United States, such as those published by Green-e®, only factor out Green-e® registered RECs, and therefore does not account for all other renewable energy purchasing claims by consumers on the grid.

¹Brander, M., Gillenwater, M., and Ascui, F. (2018). Creative accounting: A critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions. Energy Policy.

Currently, most guidance and protocols for corporate GHG inventories permit the use of RECs and GOs in the calculation of an organization’s carbon footprints. This attributional accounting practice is typically, and improperly, based on a consequential accounting argument—that eventually, if demand for these instruments grows sufficiently large, a higher price will cause an increase in renewable energy generation and therefore prevent fossil fuel-fired generation. Not only is the argument logically flawed (it is not presented as a credible method of attributing grid-wide emissions), but the factual justification has been disproved¹(i.e., voluntary certificates do not, and under feasible economic conditions, will not, influence renewable energy investment or generation) (see If more companies purchase RECs and GOs, then won’t this increased demand eventually cause more renewable energy investment and generation?).

In economic terms, RECs and GOs are intangible co-products of electricity production that are costless themselves to produce (i.e., they are simply records in a database). Existing renewable energy generation is vastly higher than the voluntary demand for RECs and GOs, so no scarcity is created by the voluntary purchase of them, which is reflected in the consistently low price. The fact that their price is not zero simply demonstrates that there is a cost of marketing and transacting them.

“Energy products that are advertised as having climate benefits but do not actually function to reduce greenhouse gas emissions mislead customers, foster customer complacency with the continued combustion of fossil fuels, and detract from urgently needed efforts to enact real solutions.” (Sierra Club, 2019)

For a detailed discussion of the origins of this collective mistake in the environmental community, see:

¹Brander, M., Gillenwater, M., and Ascui, F. (2018). Creative accounting: A critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions. Energy Policy.

Simply put, no. This exclusion does not address the fact that the voluntary market for RECs has no significant influence on renewable energy investment or generation.

The exclusion of legacy renewable and hydro facilities from the REC market implies that the certifications are intended to support claims that these certificates cause more REC investment and generation because they are restricted to more recently built generation in order to reduce the supply and create a scarcity. However, we know that the voluntary REC (and GO) markets do not and are highly unlikely to influence (i.e., cause) more renewable energy investment or generation (see If more companies purchase RECs and GOs, then won’t this increased demand eventually cause more renewable energy investment and generation?).

Highly unlikely. Research has shown that supply of RECs and GOs from existing generation vastly exceeds demand. The long-running low price for these certificates plainly exposes this oversupply.

There are currently no expectations of a near- or long-term scarcity in voluntary REC or GO markets. Therefore, the financial influence of these voluntary certificate markets on investments in renewable energy generation capacity is negligible.¹ It has been shown empirically that the existing (baseline) supply of RECs and GOs for voluntary purchases exceeds both existing and projected demand (i.e., there is no expectation of future scarcity).² If voluntary certificate market scarcity were to emerge – for example, through the imposition of a national renewable energy portfolio standard on electric utilities in the USA that removed certificate supply from the voluntary market – then it would clearly be reflected in a significant increase in REC or GO prices (including forward price curves). For example, we see no supply of voluntary market RECs coming from jurisdictions in the USA with aggressive RPS mandates on electric utilities.

¹For additional literature on the topic, visit: https://www.bccas.business-school.ed.ac.uk/impact-and-collaboration/renewable-energy-purchasing/

²Gillenwater, M. (2013). Probabilistic decision model of wind power investment and influence of green power market. Energy Policy.

A carbon credit (that may be used to offset emissions) is a transferable verified and certified tradable instrument representing avoided emissions (or removal enhancement) equivalent to one metric tonne of carbon dioxide (CO2). In contrast, voluntary RECs and GOs are tradable instruments recording the generation of one megawatt-hour of electricity (net) that has been delivered to the grid. RECs/GOs cannot validly be used as carbon credits because they do not correspond to avoided GHG emissions (see questions Is “additionality” relevant or necessary for RECs and GOs to be used in consequential GHG accounting? and What are the “environmental benefits” or “attributes” associated with RECs and GOs?). For a detailed discussion on instrument options, their environmental integrity, and how to properly claim emission reductions, see: Alternatives to Carbon Credits.

Yes, additionality is relevant in cases where a consequential avoided GHG emission or impact claim is being made or implied by a company or other consumer. However, neither the certification nor issuance process for RECs and GOs involves any kind of meaningful additionality assessment.

RECs and GOs are sometimes explicitly or implicitly claimed as serving the same function as  carbon credits (consequential accounting impact claim). However, there is no evidence of additionality in voluntary REC and GO markets – they have not empirically induced greater renewable energy generation nor is the issuance of a REC or GO subject to any kind of meaningful additionality assessment. Instead, RECs and GOs are issued for generation arising from any qualifying resource, regardless of whether that resource would have been built and/or operated in the absence of REC or GO markets. Offsetting claims associated with RECs and GOs are therefore invalid.

In some instances, quasi-consequential arguments have been used to justify the use of RECs and GOs in attributional accounting (i.e., corporate GHG emission inventories). However, if you are preparing a corporate GHG inventory, the question of additionality should not enter the discussion. Any claim of additionality that is used to justify an estimation method or assumption for a corporate inventory is categorically flawed.¹

¹Brander, M. (2021). The most important GHG accounting concept you have never heard of: the attributional-consequential distinction. Seattle, WA. Greenhouse Gas Management Institute, April 2021. https://ghginstitute.org/wp-content/uploads/2021/04/Consequential-and-Attributional-Accounting-April-2021.pdf

Because they represent little or nothing more than transaction and marketing costs.

In the United States, voluntary RECs are predominantly supplied from jurisdictions where they are not eligible to be sold to electric utilities for RPS compliance. Here, RECs sales are considered a small source of income (e.g., subsidy) to electricity generators, yet have been shown to not provide a sufficient incentive to alter renewable energy generation investment decisions (i.e., lack of additionality). The difference between the retail price of voluntary RECs versus lower wholesale prices reflects added transaction and marketing costs.¹ The simple answer is that supply of these certificates vastly exceeds demand (see If more companies purchase RECs and GOs, then won’t this increased demand eventually cause more renewable energy investment and generation?).

In the United States, the wind Production Tax Credit (PTC) and solar Investment Tax Credit (ITC) have been shown to meaningfully influence RE investment.² Also, RPS compliance REC prices have also been shown, in jurisdictions with ambitious quotas, to meaningfully influence investment and generation.³ Recently in the United States, new renewable energy generating investments are accounting for most new generating capacity and becoming least-cost new capacity, in part due to government subsidies and mandates.⁴ This market trend will likely keep voluntary REC and GO prices low, absent of a nation-wide (federal) RPS or clean energy standard.

¹U.S. EPA. The Benefits and Costs of Green Power. Guide to Purchasing Green Power. https://www.epa.gov/sites/default/files/2018-08/documents/guide-purchasing-green-power-3.pdf

²National Renewable Energy Laboratory (2014). Implications of a PTC Extension on U.S. Wind Deployment. https://www.nrel.gov/docs/fy14osti/61663.pdf

³National Renewable Energy Laboratory. Renewable Portfolio Standards: Understanding Costs and Benefits. https://www.nrel.gov/analysis/rps.html

⁴U.S. EIA. 2021. Renewables account for most new U.S. electricity generating capacity in 2021. https://www.eia.gov/todayinenergy/detail.php?id=46416

No. The verification and certification processes for RECs and GOs, such as those required by Green-e® or the I-REC Standard, only confirm that two RECs are not registered for a single MWh of generation from a renewable energy generator (i.e., no double issuance).

None of the substantive criteria that are standard for environmental accounting or impact verification in the context of a consequential environmental accounting or crediting projects and carbon credits occur in the case of REC or GO certifications. For instance, verification of a REC will confirm that 1 MWh was generated from a qualified resource and that the certificate was only claimed once. But, the certification does not provide credible assurance that a certificate meets other environmental integrity principles.

No, at least not without other structural changes.

RECs and GOs are recorded according to the year they were issued. A new type of certificate that is recorded on an hourly basis could mostly address one problem with annually denoted RECs and GOs – of claiming a generator-specific indirect emissions factor that is mismatched in time with an organization’s actual electricity consumption. RECs and GOs are in some cases not even associated with generation that occurred in the same year as they are claimed for use by a company (e.g., a 2018 vintage REC is claimed to be “used” by a company for its electricity consumption in 2020).

In theory, if the following criteria were met, then certificates could be an appropriate allocation instrument for attributional GHG accounting by companies:

• the electricity consumer and REC/GO purchasing organization as well as the renewable energy generator are on the same distribution or transmission grid,
• if certificates were used and allocated for all generation (not only renewable), and
• if GHG accounting of Scope 2 emissions was performed by all organizations using certificates (i.e., the attributional concept that the sum of all parts equals a whole).

Currently, renewable energy purchasing claims are incompletely allocated, partly double counted, as well as mismatched in both time and geography (space). Better matching certificates in time with a company’s load does not address all the other disqualifying characteristics of RECs and GOs for GHG accounting.

You should not. Most of these programs are tied back to RECs, GOs, or PPAs. See Should the “location-based” or “market-based” method be used to estimate corporate Scope 2 GHG emissions?.

Utility green pricing programs take a variety of forms in how they are financially structured. Many are built upon REC and GO transactions and entail simply allocating claims to existing renewable energy generation to these premium paying customers. Some programs report to use the revenue from the tariff premium to invest in new RE capacity; however, in these cases, utilities are also inappropriately mixing consequential and attributional GHG accounting applications and concepts.

The concept of “delivering” electricity is related to wholesale power transactions between generators and transmission/distribution utilities (i.e., a load serving entity (LSE)’s distribution system). It typically refers to the injection of electricity by a generator into a specific wholesale electricity market footprint, such as an independent system operator (ISO) or a regional transmission organization (RTO) in the USA, or to the distribution system of an LSE.

PPAs can include requirements that address where (and when) power is injected by a generator, but they cannot guarantee delivery of power to a specific end-use consumer.

Companies and other organizations should make decisions that produce positive change in the world and for the climate. Their financial decisions regarding their purchase of electrical energy services may be able to affect change for the better. Quantifying such impacts should be done through the application of an environmental impact analysis using a consequential GHG accounting method (e.g., a project-based methodology). Read about specific guidance on other procurement options for achieving more credible avoided emission impacts.

Based on evidence, purchasing voluntary market RECs and GOs does not result in positive change for the environment. It is possible that other financial arrangements like PPAs, under certain conditions, may produce a desired change (e.g., influence how much renewable energy is generated), but we lack evidence of under what conditions and whether this is the case. For the purpose of quantifying an organization’s GHG emissions, the application of green power purchasing claims (entailing an exclusive transfer of energy) is inappropriate. Companies should use consequential accounting methods to evaluate and report on the impact of their decisions and investments.¹

¹See https://www.wri.org/research/guidelines-quantifying-ghg-reductions-grid-connected-electricity-projects