AMSTERDAM - Renewable Energy Certificates are not carbon offsets and should not be eligible as such under a U.S. climate bill, an environmental policy expert told Reuters.
Carbon offsets are generated by greenhouse gas cuts made by clean energy projects like wind farms that are 'additional', meaning they would not have been financially viable without the prospect of offset sale revenues.
They are created when renewable power generators sell electricity and then sell the environmental attributes of that electricity separately through a certificate representing one megawatt hour of low-carbon power.
Although RECs are traded in several U.S. states, experts have called them a poor man's carbon offsets, arguing they do not fund additional renewable energy and therefore should not be eligible under a U.S. cap-and-trade scheme.
We don't like the idea of RECs as offsets and don't want to see this in a bill, Tim Juliani, said senior fellow at climate policy thinktank the Pew Center on Global Climate Change.
Climate bills introduced by the U.S. Senate last week and passed by the House of Representatives in June would see U.S. carbon dioxide emissions cut to between 17 and 20 percent below 2005 levels by 2020.
Firms unable to cut emissions cheaply can buy offsets, thus creating a market of up to 2 billion tonnes of carbon annually.
As a result, the battle lines have been drawn, with a coalition of international energy firms that support the use of RECs as offsets on one side, and an array of offset aggregators, project developers and climate policy experts on the other.
There are certain types of projects, such as biodigesters, landfill methane and (tree-planting) that many would agree are clearly additional, while other types such as renewable energy are inappropriate as offsets because the electricity sector will be regulated, Juliani told Reuters.
Both bills leave open the question of how RECs would be treated under a federal scheme unanswered.
In January 2008, the U.S. Federal Trade Commission, which regulates advertising claims, held a workshop focusing on the marketing of RECs as offsets.
The commission said no policy changes have been made as a result, but some experts think it will adopt a more REC-friendly position in response to lobby pressure from utilities.
Juliani also welcomed the news that three utilities have decided not to renew their membership to American big-business lobby The U.S. Chamber of Commerce, and that sportswear giant Nike last week resigned from the group's board.
Exelon Corp, the largest nuclear operator in the United States, California utility PG&E Corp and New Mexico-based PNM Resources Inc in the past two weeks have left the chamber as a result of their displeasure with its stance on climate change legislation.
The chamber has not been a positive force in advancing climate legislation, Juliani said on the sidelines of a carbon trading seminar in Amsterdam last week.
The three departing companies, which are all members of the Pew Center's Business Environmental Leadership Council (BELC), recognize that their internal positions on climate change are incompatible with that of the chamber.
Juliani manages BELC, the largest U.S.-based association of corporations focused on addressing the threat of climate change and supporting mandatory government climate regulations.
BELC includes 45 companies with combined revenues of over $2 trillion and over 4 million employees.
(Editing by James Jukwey)