Understanding Carbon Offsets

RECs, PPAs, Allowances and EECs

Some companies purchase other kinds of tradable instruments associated with GHG emission reduction claims or engage in transactions that include such claims. But, not all these options are equal in their effectiveness and environmental integrity.

In most cases, these purchases and transactions are not subject to certification against standards required for effective carbon offset claims. Examples of some of these “emission reduction instruments” are listed below; follow the links for explanations of what they are and their suitability for making offset claims.

The findings in this guide are based on researched evidence. This evidence suggests that several commonly used instruments – including voluntary renewable energy certificates (RECs), green power purchases (PPAs), and energy efficiency certificates (EECs) – should be avoided by organizations whose primary goal is to achieve credible and quantifiable GHG reduction targets. See our Green Power FAQ, for a detailed resource on voluntary purchasing green power claims and greenhouse gas accounting.

Voluntary carbon offsets are a viable instrument to reduce emissions, but due diligence is recommended to understand project risks and select appropriate options. Voluntary cancelation of emission allowances may be an effective option, provided the selected ETS market is not oversupplied (with allowances). Prospective buyers are advised to perform analysis to determine allowance supply within selected markets prior to making a purchase.