What is a REC and Why Does it Matter for Businesses?

April 8, 2008

Wikipedia defines a Renewable Energy Credit as: “Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, or Tradable Renewable Certificates (TRCs), are tradable environmental commodities that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.” 

The idea behind RECS is that businesses (and individuals) can offset their carbon footprint by purchasing Renewable Energy Credits. While the rationale is clear-cut for businesses that are big polluters, it is less obvious for companies work out of an office and are telephone / computer focused.

Wikipedia also notes that: “A popular incentive for buying RECs is to make the claim that your energy use is carbon neutral and hence does not contribute to global warming. Looking at the situation from a macroscopic level, buying RECs finances some portion of the increased costs of green energy producers, to reduce the producer's increase in cost as compared to sources which pollute more. However, it could be argued that the green energy production facilities which are already built today might still continue functioning and producing energy at the same rate even if no one were to buy another REC. On a microscopic level, buying a few RECs has very little direct effect on the amount of CO2 produced at this very moment. As larger and larger numbers of RECs come into demand, however, renewable energy will become more and more cost effective per kWh in comparison to nonrenewable energy. “

So should purchasing carbon offsets be a priority for businesses today? We believe that the answer is YES. As referenced above, in the big picture, the cumulative impact will be enormous, although the direct impact today is much harder to quantify. That logic, however applies to a number of the dimensions of the Go Green movement and every small step matter and is instrumental from a “setting the tone” perspective with employees and customers. Let your customers see first-hand that you go to the efforts to recycle within the office.

Successful business owners make investments everyday with a long term perspective in mind. Going Green is another example of a path to be taken that may not yield tangible benefits in the short run, but has untold, long term upside potential. Lastly, purchasing RECS is not very expensive for most companies, so cost should not be a deterrent.


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