Renewable Energy Credits And Carbon Offsets

I’m Neutral, Are You?

If you're reading this, you're using electricity. In fact, you are probably one of the three hundred million Americans who draws electricity from a grid primarily powered by fossil fuels. According to CARMA, Carbon Monitoring for Action, the United States currently produces almost 2.8 billion tons of carbon dioxide annually through electricity generation, more than any other country (although China's hot on the trail, coming in with just under 2.7 billion tons of carbon dioxide). That's more than 900 tons per person per year! And as many of us know, carbon dioxide is a big player in climate change.

So what do you do? That's a pretty huge carbon footprint to be following each one of us around (and that's not even taking personal transportation into account). Well, beyond the obvious (change out incandescent light bulbs for more efficient bulbs, replace old appliances with new energy efficient versions, deal with your vampires, etc.), some people are looking steer the market toward renewable energy alternatives. Even if you're not developing a wind farm or working in energy policy, you can choose with your dollars.

But what's the difference between Renewable Energy Certificates/Credits (RECs) and those very buzz-wordy carbon offsets?

Renewable Energy and REC Basics

Wikipedia defines renewable energy as that which "effectively utilizes natural resources such as sunlight, wind, tides and geothermal heat, which are naturally replenished." In some areas, you can choose a green pricing program which allows you to voluntarily pay any additional costs for renewable energy through direct payments on your monthly electric bill; in return, the utility provider guarantees it will provide that amount of sustainably generated electricity. If that's not available, however, fear not. RECs represent the positive environmental attributes that are associated with the production of renewable electricity. A little confusing, right? Here's a quick and dirty breakdown of how it works.

Electricity is generated through conventional methods (burning fossil fuels) and through renewable methods (wind, sunlight, etc.).
1. The renewable generation results in one REC per unit of green power.
The electrons go into an electricity grid where they get all mixed up, because, let's face it, they all look the same.
You buy electricity from the grid. You also buy an REC. Even if the actual electrons associated with your REC aren't coming to you, you have purchased the positive attributes/property rights to the REC. That means that you can legally say you're buying that type of renewable energy.

Good RECs v. Bad RECs

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Voluntary v. Complaince Markets for RECs

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Carbon Offset Basics

"A carbon offset is a certificate representing the reduction of one metric ton (2,205 lbs) of carbon dioxide emissions, the principal cause of global warming. Although complex in practice, carbon offsets are fairly simple in theory. If you develop a project that reduces carbon dioxide emissions, every ton of emissions reduced results in the creation of one carbon offset. Project developers can then sell these offsets to finance their projects.

There are hundreds of different types of carbon reduction projects. For example, a wind farm generates clean energy, which reduces carbon emissions from coal-burning power plants. In order to finance its operations, a wind farm can sell these reductions in the form of carbon offsets." (Source: TerraPass)