Does the purchase of voluntary renewable energy certificates lead to emission reductions? A review of studies quantifying the impact

We contribute to the discussion on the effectiveness of voluntary renewable energy certificate (REC) purchases by reviewing the eight techno-economic modelling studies that quantitatively assess their emissions impacts. For the five energy system modelling studies that provide their output data, we use a set of synthesis indicators to compare the extent to which different modelled REC purchase conditions resulted in additional renewable energy generation (REG) and emission reductions as compared to a counterfactual where there is no REC market. The studies focused primarily on the temporal dimension of REC purchase conditions. Their results suggest that annual volumetric and annual emissions matching do not lead to significant emission reductions compared to a counterfactual without a REC market, taking into account recent government policies. This is because investments are made almost exclusively in the cheapest available renewable resource, cannibalising market-driven projects that would have been economically viable in the absence of a REC market. On the other hand, the studies find that hourly matching (with power purchase agreements involving local and new RE generators) leads to significant emission reductions, taking into account recent government policies. We discuss the sensitivity of individual study results to modelling assumptions and highlight potential challenges in designing an energy system modelling study for the specific purpose of investigating the impact of different REC purchase conditions on renewable energy generation and emission reductions. Our findings can inform ongoing the discussions on how companies should account for their electricity-related emissions and on criteria for the production of renewable fuels.

Keywords: GHG Protocol standards, Renewable energy certificate, Emissions reduction, Renewable fuel regulation; Energy systems modelling

JEL Classification: Q28, Q48, Q51, Q58

Suggested Citation: Suggested Citation

Langer, Lissy and Brander, Matthew and Lloyd, Shannon M. and Keles, Dogan and Matthews, H. Damon and Bjørn, Anders, Does the purchase of voluntary renewable energy certificates lead to emission reductions? A review of studies quantifying the impact (November 17, 2023). Available at SSRN: https://ssrn.com/abstract=4636218 or http://dx.doi.org/10.2139/ssrn.4636218