Renewable Energy Certificates (RECs)
A Renewable Energy Certificate (REC) represents the environmental attributes of one megawatt-hour (MWh) of electricity generated from a renewable energy source. RECs are used in market-based Scope 2 accounting to claim renewable electricity consumption, separate from the physical delivery of electrons.
RECs decouple the environmental benefit of renewable generation from the physical electricity. When a solar farm generates 1 MWh, it produces two products: the electricity itself (sold into the grid) and the REC (the certified environmental attribute). A company can purchase RECs to claim the renewable attributes of that generation for Scope 2 market-based accounting.
There are two main types: bundled RECs (sold together with the physical electricity, as in a PPA) and unbundled RECs (sold separately on the REC market). Generally, bundled RECs from new-build projects (additionality) are considered higher quality than unbundled RECs from existing facilities.
The GHG Protocol Scope 2 Guidance accepts RECs for market-based Scope 2 reporting, provided they meet quality criteria: the REC must represent generation from the same market/grid as consumption, must not be double-counted, and must be retired (removed from circulation) on behalf of the claiming entity.
Criticism of RECs centers on additionality: purchasing cheap unbundled RECs from a decades-old wind farm does not drive new renewable capacity. Companies are increasingly moving toward PPAs, virtual PPAs, and 24/7 hourly matching programs that better demonstrate additionality and temporal alignment between consumption and generation.
Frequently asked questions
What is a Renewable Energy Certificate (REC)? +
A REC represents the environmental attributes of 1 MWh of renewable electricity generation. Companies purchase and retire RECs to claim renewable energy use in their market-based Scope 2 accounting, separate from the physical delivery of electrons.
Do RECs reduce Scope 2 emissions? +
RECs reduce market-based Scope 2 emissions to zero for the corresponding energy amount, but they do not change location-based Scope 2 figures. Quality matters: bundled RECs from new-build projects (additionality) are considered more impactful than unbundled RECs from existing facilities.
Related terms
Scope 2 Emissions
Scope 2 emissions are indirect greenhouse gas emissions from the generation of purchased electricity, steam, heating, and cooling consumed by an organization. They are called 'indirect' because the emissions physically occur at the power plant or utility, not at the reporting company's facilities.
Energy Management
Energy management is the systematic monitoring, control, and optimization of energy consumption in an organization to reduce costs, improve efficiency, and lower carbon emissions. It encompasses utility bill tracking, real-time meter monitoring, anomaly detection, efficiency project planning, and incentive capture.
Decarbonization
Decarbonization is the process of reducing greenhouse gas emissions across an organization's operations and value chain through energy efficiency improvements, fuel switching, renewable energy procurement, process changes, supply chain engagement, and technology adoption. It is the operational work that turns reduction targets into real emission cuts.