How are Renewable Energy Certificates (RECs) different from Carbon Credits
Yang Haini
This article will explain what renewable energy certificates are, how they are utilised, and how they differ from carbon credits.

In our collective efforts to combat climate change and transition to a sustainable future, many people may have heard relatively more about carbon credits, but perhaps have not heard much about renewable energy certificates. Renewable Energy Certificates (RECs) have emerged as a crucial market-based instrument in this regard.

What is a Renewable Energy Certificate (REC)?

A REC is a tradable environmental commodity that is issued when one net megawatt-hour (MWh) of electricity is generated and supplied to the grid from an eligible renewable energy resource. It decouples the environmental benefits of renewable energy generation from physical electricity, allowing for separate trading and supporting the growth of renewable energy infrastructure.

Distinction from Carbon Credits

To understand the difference between RECs and carbon credits, let us examine the three classifications of carbon emissions. Scope 1 and Scope 2 emissions are mandatory to report, while Scope 3 emissions are voluntary. Scope 1 emissions are direct emissions from a company's owned or controlled operations, such as fuel combustion or process emissions. Scope 2 emissions arise from purchased or acquired electricity, heating, or cooling consumed by the company.

RECs are primarily used to decarbonise Scope 2 emissions by ensuring that the electricity consumed is generated from renewable sources. On the other hand, carbon credits can be utilised to offset emissions from all Scopes 1 to 3. However, when it comes to Scope 2 emissions, RECs are often considered a better choice due to their specificity for power consumption and the ability to claim 100% renewable energy. It's important to note that as of April 2021, Verra VCS Standard no longer allows renewable energy projects in non-Least Developed Countries, making carbon credits unavailable for such projects.

How are Renewable Energy Certificates Utilised and Why are They Important?

RECs are commonly used by companies in Singapore for voluntary offsets under the RE100 global initiative. Members of RE100 pledge to transition their electricity consumption to 100% renewable sources and report on their progress towards these goals. This standard specifies Singapore as a single market, so companies can only purchase RECs generated in Singapore.

In 2021, the Singapore Standards Council in collaboration with industry introduced a more flexible framework (SS673) that allowed companies to use RECs for renewable energy claims in Singapore. This is conditional on the the installation being connected to a grid operated by a regulated-entity.  The installation also has to be located in Singapore, or contractually supplying electricity in Singapore, or located in Southeast Asia.

In December 2023, the Singapore Ministry of Sustainability and the Environment, along with the National Environment Agency, released an eligibility list for international carbon credits within the carbon tax regime. The National Climate Change Secretariat (NCCS) of Singapore also has partnered with Gold Standard and Verra's Verified Carbon Standard to create a playbook aimed at helping nations enhance their utilisation of current carbon-crediting initiatives.

Compared to the usage of carbon credits which are expected to be increasingly regulated under Singapore’s Carbon Pricing Act, we believe RECs will be lightly regulated. So in terms of calculation and reporting standards, REC will offer greater flexibility for individual buyers and SMEs looking to participate in the voluntary market and this will accelerate the adoption of clean energy in Singapore.

Buyers in RECs can expect to benefit from significant growth in the REC market, with projections indicating substantial price increases. The I-REC and TIGR markets are expected to grow from $500 million in 2022 and potentially $40 billion by 2030. Asia holds the largest market share, followed by South America and the rest of the world. Overall, the global REC market is estimated to reach approximately $111 billion by 20301. The market's expansion reflects the growing emphasis on renewable energy adoption worldwide, supporting a sustainable energy future.

RECs are crucial in the fight against climate change, enabling carbon reduction and sustainability across supply chains. They play a pivotal role in achieving net-zero emissions targets and fostering a greener, more resilient future.

InterOpera operates OperaX, an exchange for renewable energy certificates and carbon credits. If you are interested in addressing climate change and offsetting your emissions, click here to purchase renewable energy certificates and carbon credits.

1. Yahoo Finance:USD 111 Billion Growth in Renewable Energy Certificate Market Size - Industry Analysis, Market Trends, Market Growth, Opportunities.

2. Singapore, global verification programmes to develop carbon-crediting best practices


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