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Redefining RECs--Part 1: Untangling attributes and offsets

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  • Gillenwater, Michael
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    Renewable energy and greenhouse gas emissions markets are currently in a state of confusion regarding the treatment of Renewable Energy Certificates (RECs). Should consumers buy RECs or emission offsets? After examining this question, the author concludes that RECs are not equivalent to emission offset credits, and as currently defined, the retiring of a REC may have no impact on emissions from electric power generation. Consumers who purchase RECs in voluntary green power markets are providing financial assistance to renewable generators in the form of a production subsidy. Generators that sell RECs are not transferring emission reductions, since they are unlikely to have ownership or the ability to quantify reductions using a commonly accepted standard. More importantly, RECs currently sold in voluntary markets do not pass credible additionality tests and can, at best, be expected to have a market demand effect, which will be less than the supply of RECs on the market. REC definitions that use the term "environmental attributes" or "environmental benefits" are almost universally ambiguous, providing the mistaken impression that consumers are purchasing a good instead of subsidizing a public good.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0301-4215(08)00080-3
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    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 6 (June)
    Pages: 2109-2119

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:6:p:2109-2119
    Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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    1. M. Voogt & M.G. Boots & G.J. Schaeffer & J.W. Martens, 2000. "Renewable Electricity in a Liberalised Market – The Concept of Green Certificates," Energy & Environment, , vol. 11(1), pages 65-79, January.
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    4. Agnolucci, Paolo, 2007. "The effect of financial constraints, technological progress and long-term contracts on tradable green certificates," Energy Policy, Elsevier, vol. 35(6), pages 3347-3359, June.
    5. Wiser, Ryan & Bolinger, Mark & Barbose, Galen, 2007. "Using the Federal Production Tax Credit to Build a Durable Market for Wind Power in the United States," The Electricity Journal, Elsevier, vol. 20(9), pages 77-88, November.
    6. Heiman, M.K., 2006. "Expectations for renewable energy under market restructuring: the U.S. experience," Energy, Elsevier, vol. 31(6), pages 1052-1066.
    7. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    8. Borchers, Allison M. & Duke, Joshua M. & Parsons, George R., 2007. "Does willingness to pay for green energy differ by source?," Energy Policy, Elsevier, vol. 35(6), pages 3327-3334, June.
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