10 Steps to Becoming a Carbon Neutral Business

Page 32 Although RECs and carbon credits have some similarities, they are not the same. While one carbon credit proves that one ton of CO2 was reduced or avoided, one REC proves that one MWh of renewable electricity was generated. Carbon credits will compensate all non-electricity carbon emissions and can be used for a variety of emission sources – waste, business travel, transport, employee commuting. Technically speaking, you could also use carbon credits to offset your emissions from electricity consumption. Best practice, however, is to purchase RECs to green your electricity supply as it is considered more “precise” and you then use offsets for the other emission sources. Additionality is optional for RECs, while for carbon credits, additionality is a key requirement. If your investment does not reduce additional CO2 beyond what would otherwise have happened, you will not receive a credit. The differences between RECs and carbon credits RECs Carbon credits Unit of measure One MWh One ton of CO2e Generation When one MWh of renewable energy is generated, one REC is issued When one ton of CO2e is avoided, one carbon credit is issued Type of project Only renewable energy projects Any project that reduces CO2e, for instance renewable energy, cooking stoves or reforestation projects Emissions addressed Only Scope 2 emissions from purchased electricity Could be Scope 1, 2 or 3 emissions, although best practice is to balance Scope 2 emissions from purchased electricity with RECs Additionality Optional, not required Required Claim Guarantee that one MWh of electricity is consumed from a renewable source Guarantee that one ton of CO2e has been avoided elsewhere in the world to compensate for your emissions Benefits Only environmental benefits Environmental, optional additional social benefits Your carbon offset process relies on the outcome of your greenhouse gas accounting process and involves a decision on your purchasing strategy. You can buy your credits at the end of the year, reflecting your exact carbon footprint as determined by your greenhouse gas accounting process. The downside of that approach is that prices of carbon credits tend to go up during the year as supply decreases so you might end up paying a premium compared to if you bought upfront. You can of course also try to buy all the credits up front to make sure you have locked the price, but there will always be an uncertainty on where exactly your final carbon footprint lands and you do not want to buy excess either! An acceptable compromise might be to reserve the majority of the carbon credits you believe you will need within a given year. You could for instance purchase 75 percent upfront and settle the remaining balance at the end of the year when you have the actual emissions data. This way you secure the price for the bulk of your carbon credits and limit the risk of overbuying. STEP 08: BALANCE YOUR REMAINING EMISSIONS