Experts at Concordia University claim that renewable energy certificates (RECs) are "ineffective" in limiting major companies' carbon footprint worldwide.

Renewable Energy Certificates, Ineffective in Discouraging Carbon Footprint

In a journal published by experts from Concordia University, they showed pieces of evidence indicating that many companies still have much larger carbon footprints. This finding is also the reason why the authors of the journal noted that RECs are also ineffective in encouraging more renewable energy production.

RECs were designed as a "market-based instrument, " certifying that its holder owns at least one megawatt-hour (MWh) of electricity from a renewable energy source. RECs can be sold to other companies, especially those that seek to offset their carbon emissions. It is also commonly referred to as green tags or tradable renewable certificates (TRC).

"RECs do not reflect the physical electricity flow supplied to the companies purchasing them, and there is evidence that RECs are unlikely to lead to additional renewable energy generation," according to researchers.

The finding also indicated that RECs had become a way for some companies to offset the actual record of their carbon emissions. According to the study, corporations can use RECs to report zero emissions on paper by purchasing RECs that can offset each unit of their electricity consumption.

We Might Actually be Behind on the Paris Temperature Goal, Researchers Believe

Moreover, the researchers stressed that emission reduction reports that factor in RECs cannot assure a real update on a company's global emission reductions and compliance with the Paris temperature goal.

This issue can be problematic because if RECs are removed, it can reveal that many companies remain far behind their commitment to the goals of the Paris Agreement.

While we have seen a combined 30.7% reduction in market-based carbon emissions, most of it can be credited to the "use of RECs which increased from covering 8% of their purchased energy in 2015 to 27% in 2019."

"It's basically ineffective in terms of influencing renewable energy investment or generation," says Michael Gillenwater, REC expert, executive director, and dean of the Greenhouse Gas Management.

If RECs are not factored in carbon emission reduction reports, it could reflect that only 36% of the world's companies are meeting the Paris Agreement targets.

What Might be a Better Alternative to Foster Carbon Reductions?

Researchers stated their assumption that power purchase agreements (PPAs) are more effective in encouraging the use of renewable energy.

"Although empirical evidence is still needed, we have adopted here the common assumption that PPAs do lead to additional renewable energy production and real emission reductions, as the long-term power price de-risks new projects and allows access to project finance," said researchers.

In the study, the researchers referred to the public disclosure of 115 companies. All of which also covered the reports that included data about their RECs. It also zeroed in on Scope 2 emissions which refer to how companies are purchasing energy.

According to researchers, the findings reflect lacking credibility in REC as a way to reduce carbon emissions. Since the Greenhouse Gas Protocol is set for amendments this year, the researchers say that the way emissions are reported must be incorporated with a more nuanced consideration of RECs.