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Companies’ Climate Goals in Jeopardy From Flawed Energy Credits

A new study charges that renewable energy credits are leading businesses to overestimate their carbon emissions cuts.

A Solar Plant As Mexico Power Reform Jeopardizes Clean Energy
Photographer: Mauricio Palos/Bloomberg
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To neutralize their carbon dioxide emissions, many companies buy certificates from clean power providers, called renewable energy credits, allowing them to claim they’re using carbon-free power. A new analysis finds that when those credits — which have come under heavy scrutiny — are removed from companies’ carbon accounting, many businesses are no longer on track for meeting climate goals pegged to the Paris Agreement’s aims of limiting global warming to 1.5° or 2° Celsius. 

Renewable energy credits (RECs) for years have been an attractive way for companies to shrink their carbon footprints without necessarily contracting directly for clean power or installing solar farms and wind turbines. Instead, they buy RECs and subtract an equivalent amount of fossil-fuel-powered electricity from their climate ledgers. The analysis suggests that because RECs are a lower-cost alternative to making emissions disappear, the ability to use them encourages companies to set more ambitious targets.