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What are Renewable Energy Credits?

Mary McMahon
Updated May 16, 2024
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Renewable Energy Credits, also called Green tags or Tradable Renewable Certificates, are certificates issued by a government agency to a power company that utilizes environmentally friendly methods to generate electricity. The credits can in turn be traded and sold on the open market, providing an incentive to companies which produce “green” power. Citizens and companies who are trying to support green power and reduce their carbon footprints can also take advantage of them, regardless as to the source of their power.

Sources of green power include solar, wind, geothermal, biomass, biodiesel, some fuel cells, and low impact hydropower. In a company that uses these sources in a state which participates with the Renewable Energy Credits program, the company is offered one credit for a set amount of energy produced, typically 1,000 kilowatt hours. The credit is given a distinct number so that it can be tracked, the power is fed into the grid, and the company offers the credit for sale.

Renewable power companies benefit from these credits because they serve as an incentive. Many non-renewable energy sources are subsidized, making it difficult for green energy companies to survive. By being able to sell the power and Renewable Energy Credits, the company can afford to thrive in the market. Prices for these credits vary widely, just like other commodities, and they are available for sale in numerous locations.

By purchasing Renewable Energy Credits, consumers can claim that they are supporting green energy. While a consumer would ideally also purchase renewable energy for his or her home, this is not always possible. The credits allow companies and individuals to support alternative power in areas that do not offer it directly. Consumers should also, of course, practice conservation and work to get green power in their area, but Renewable Energy Credits are a good place to start. For companies, they are an important part of doing business responsibly, while thinking about future generations.

Along with carbon offsets and other incentive programs, Renewable Energy Credits are part of a growing movement which acknowledges that even small changes make a big difference. By supporting green energy, consumers show that there is a demand for it, and companies can build more plants or accelerate production with the funds raised through the sale of credits. Organizations that promote programs like this hope to eventually see everyone's ecological footprint, meaning the amount of resources and space needed to support a particular lifestyle, greatly reduced.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a HomeQuestionsAnswered researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon137449 — On Dec 27, 2010

what is a rec worth in us dollars?

By anon79526 — On Apr 23, 2010

They're just an investment? Not like carbon credits?

By anon78939 — On Apr 20, 2010

They were invented by Enron.

By donricketts — On Apr 18, 2010

I'm not sure I understand REC's. I gather that because it costs more to produce electricity from renewable resources instead of fossil fuel, the renewable credit allows a utility (and others) to sell the credit and recoup some of the cost. Do I have that right?

But I also understand that a polluter can buy these credits and, somehow, gain some benefit from it. What is that benefit?

Can someone help me understand this?

By anon16806 — On Aug 15, 2008

RECs can be bought, sold and commerialized on the open market without any influence from government agencies.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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