RECs vs. Carbon Credits: What's the difference and why does it matter?

 When companies and individuals talk about “going green,” two terms often come up: RECs (Renewable Energy Certificates) and carbon credits. Both are tools to support environmental sustainability, but they work in very different ways. Here’s a simple breakdown to help you understand what they are, how they differ, and why it matters.

What is a REC?

RECs, or Renewable Energy Certificates, represent the environmental benefits of generating one megawatt-hour (MWh) of electricity from a renewable energy source like solar, wind, or hydro.

When a renewable energy facility (like a solar farm) produces electricity, it generates two products:

1. The physical electricity

2. The environmental attribute of that clean electricity, this is the REC.

   RECs allow buyers, whether individuals, businesses, or governments, to claim they are using renewable energy, even if the electricity powering their operations comes from the traditional grid. This system encourages the production of green energy by giving renewable producers a way to earn additional income.

What is a Carbon Credit?

Carbon credits (also called carbon offsets) represent the reduction or removal of one metric tonne of carbon dioxide (or equivalent greenhouse gases) from the atmosphere.

These credits are created by projects that prevent, reduce, or capture emissions, such as reforestation, methane capture from landfills, or carbon capture technology. By buying a carbon credit, you’re essentially funding these projects to offset emissions elsewhere.

This system is often used by companies to meet carbon neutrality goals by offsetting emissions they can’t eliminate internally.

What’s the difference?