Insights / Do you know your RECs from your offsets?

Do you know your RECs from your offsets?

19th August 2022

If you’re actively considering the best way to decarbonise your business, then you’ve probably come across Renewable Energy Certificates (RECs) and carbon offsets already. But what exactly are they, and which of them would be better for your set of circumstances?

RECs vs Carbon Offsets - header image

How can RECs and carbon offsetting help your business decarbonise?

Both RECs and carbon offsetting can help you reduce or mitigate the greenhouse gas emissions associated with your business. The biggest difference between the two is that while RECs deliver carbon mitigation within your value chain, offsetting delivers mitigation beyond your value chain.

What’s a REC?

The first steps you’re likely to take when aiming to decarbonise is to reduce the carbon emissions your business is directly responsible for. That’s going to mean reducing the carbon footprint from your own operations and the energy you use. Renewable Energy Certificates (RECs) can help to prove you’re doing that.

A REC is an electronic certificate demonstrating that a particular portion of electricity – one megawatt-hour (MWh) – has been renewably generated and delivered to the grid.

(The term REC is also often used to cover other proofs that the energy they cover has a renewable origin. These might include Renewable Energy Guarantee of Origin (REGO) certificates in the UK, and Guarantee of Origin (GoO) certificates in Europe and even Renewable Gas Guarantee of Origin (RGGO) certificates.)

What can I use a REC for?

RECs can help you reduce emissions in your business’s value chain through the energy you purchase.

Every REC purchased allows you to claim that one MWh of renewable power has been consumed by your business. Added together, your RECs prove how much renewable, zero-carbon power you‘ve used. They’ll also help you calculate by how much you’ve reduced your business’s carbon emissions.

You can use this information to substantiate your business’s efforts to achieve its commitments in the fields of Corporate Social Responsibility (CSR) or Environmental, Social and Governance (ESG).

It’s important to remember that RECs are market based, not location based. So they’ll only prove that you’ve used a certain amount of renewable energy, not whereabouts you’ve done it.

What Scope do RECs affect?

RECS affect the electricity your organisation buys, which is covered by your Scope 2 emissions under the GHG protocol This is because Scope 2 covers emissions associated with the purchase of electricity, and by holding a REC you can report 0g for CO2 emissions associated with your electricity consumption.

What is carbon offsetting?

Unlike RECs, carbon offsetting is a way of mitigating (‘offsetting’) GHG emissions beyond your organisation’s value chain. It’s a way of compensating for emissions that cannot be avoided.

Each tonne of CO2 mitigated generates a credit which can be sold to customers via the voluntary carbon market. In future, we anticipate that these will be joined by more carbon removal credits, generated through activities such as Bioenergy with Carbon Capture and Storage (BECCS).

Say your business is involved in the production of a carbon intensive product. In order to mitigate emissions generated during the product lifecycle you could purchase an equivalent number of carbon credits to those emissions.

What can I use carbon offsetting for?

It’s often used as a way to mitigate emissions that are not immediately avoidable within the business, and to complement a longer term emission reduction strategy. An example of this is air travel, which doesn’t yet have zero-carbon transport technology.

How can I offset my emissions?

Your business can buy something called a carbon credit from a company like Drax or from the market.

You can use these credits to demonstrate that your business is supporting carbon mitigation efforts beyond your value chain. And, as with RECs, you can use them to substantiate your progress towards ESG or CSR commitments.

What scope do carbon credits affect?

Carbon credits are not captured within your corporate footprint on the basis that these activities exist beyond a company’s value chains. However, they can be considered alongside your inventory to demonstrate efforts to tackle unavoidable emissions across your corporate footprint.

From carbon reduction to carbon removal

In order to reach net zero commitments, businesses will need to not only reduce carbon emissions, but remove carbon dioxide from the atmosphere as well. Removals provide the only way to tackle unavoidable residual emissions in the delivery of science-based net zero targets.

One way of achieving this is through projects such as bioenergy carbon capture and storage (BECCS), which we’ve been developing. This is due to come on stream in 2027/8 and will offer a lasting route to permanent decarbonisation.

If you’d like to know more about decarbonising your business, we’d love to help you. Please use the form below to get in touch.

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