Carbon Credits VS Renewable Energy Certificates: Which one should you choose?

Carbon Credits and Renewable Energy Certificates are typically a form of climate currency, and they share the related context of environmental sustainability and the reduction of greenhouse gas emissions. In contrast, they serve different purposes and objectives that businesses should acknowledge.

Purposes of Carbon Credit

Carbon Credits are also known as Carbon Allowances that permit owners to emit one ton of carbon dioxide or an equivalent amount of other greenhouse gas emissions (methane or nitrous oxide). This means that they can be supplied or demanded through a cap-and-trade market, which is a market that limits the total amount of carbon dioxide emitted to the atmosphere, both globally and nationally. The business usually purchases more if the carbon dioxide emitted exceeds the amount of carbon dioxide allowed to be cast. On the other hand, the company can sell the unused credits to other entities or businesses if the emission does not reach the limitation of greenhouse gas emissions allowed.

The ultimate goal of the Carbon Credit establishment is to restrict the number of credits over time, thus incentivizing organizations to find innovative solutions to diminish greenhouse gas emissions.

Purposes of Renewable Energy Certificate

Renewable Energy Certificate (REC) is also an available tool to restrain the carbon footprint. It is a market-based instrument representing the property rights of the environment, society, and other non-power attributes of renewable electricity generation. This means REC can be traded through an open market as an energy commodity. It proves that the electricity source is from green energy such as wind, hydro, solar, and more. Besides, the REC program acts as an accounting or tracking mechanism for green energy sources incorporated into the power grids. If the owner is not utilizing all electricity, it will flow back to the power grid, which other consumers can obtain.

The foremost objective of REC is to restrict greenhouse gas emissions to a low or zero carbon footprint and to clarify the source of electricity generation that is from green energy.

The differences of Carbon Credit and Renewable Energy Certificate

Here are some key differences between Carbon Credits and Renewable Energy Certificates: 

1. Ways to reduce carbon dioxide emissions

• Carbon Credits: They cap how much carbon dioxide an organization emits, and the cap will gradually decrease over time.
• RECs: They prefer utilizing the electricity generated from green energy rather than non-renewable energy sources.

2. Effects on carbon pollution

• Carbon Credits: They affect non-directly to the diminish of carbon footprint.
• RECs: They directly affect the depletion of carbon footprint.

3. Environmental benefits

• Carbon Credits: They promote businesses to switch to greener energy sources and enhance energy independence.
• RECs: They facilitate low maintenance and non-pollution, decentralize energy supply, and create green jobs.

In summary, Carbon Credits and RECs are both tools for promoting environmental sustainability and combating climate change, but they focus on different aspects of emissions reduction and renewable energy promotion. Carbon Credits are more diverse in origins, while RECs are exclusively tied to renewable energy generation.