A variety of options are available to organizations to claim avoided GHG emissions through financial interventions if they deem achieving their GHG reduction target through internal reductions as too difficult. But not all these options are equal in their effectiveness and environmental integrity.
The findings in this guide are based on researched evidence. This evidence suggests that several commonly used instruments – including voluntary renewable energy certificates (RECs) and energy efficiency certificates (EECs) – should be avoided by organizations whose primary goal is to achieve credible and quantifiable GHG reduction targets. There is currently insufficient evidence to assess under what conditions renewable energy power purchase agreements (PPAs) would be expected to have environmental integrity.
Voluntary carbon credits are a viable instrument to claim avoided emissions or enhanced removals, but due diligence is strongly recommended to understand project risks and select appropriate options. Voluntary cancelation of emission allowances or compliance RECs may be an effective option, provided the selected ETS or RPS market is not oversupplied with allowances or RECs, respectively. Prospective buyers are advised to perform analysis to determine allowance or compliance REC supply within selected markets prior to making a purchase.
Distilled Claims Considerations
| Instrument | Summary recommendation |
|---|---|
| Carbon credits | The environmental integrity of most credits is likely low. Credits are therefore only a good option if they come from well selected project types. Buyers should focus on project types for which credit payments constitute a large share of the overall project revenue and should consider long-term contracting options. |
| Cap-n-trade (or ETS) allowances | In principle a good option, but only if the allowances do not come from an oversupplied market. Cap-n-trade allowance market conditions should be evaluated to ensure allowances are not oversupplied to reduce environmental integrity risk. |
| Voluntary RECs | Although widely used by many organizations, voluntary RECs present overwhelming environmental integrity problems. Research shows that voluntary RECs do not actually deliver avoided GHG emission benefits, and are thus ineffective to claim avoided emissions or zero emission energy purchases. |
| Compliance RECs | There is high confidence in the environmental integrity of compliance RECs where the relevant RPS regulation creates a market scarcity for RECs. Purchasing compliance RECs through a long-term contract may strengthen the assurance that the investment has led to additional avoided emissions. |
| Renewable energy PPA | Bundling compliance RECs with a long-term PPA may strengthen environmental integrity, but not necessarily. |
| Renewable energy direct investments | A direct investment in a renewable energy project introduced added complexity, without a guaranteed increase in environmental integrity relative to carbon offset credit option. |
| Energy efficiency certificates (EECs) | The market for EECs is immature and faces several significant environmental integrity challenges. Organizations should wait for these markets to mature before using EECs to make avoided emission claims. |