Purchasing carbon credits and I-RECs to offset your residual emissions
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We work with our clients to support them towards their long-term net-zero goals, and some of our clients see great value in purchasing carbon credits and I-RECs to offset their residual emissions that they haven’t reduced yet with their reduction efforts. Fulfilling their immediate offset requirements simply allows their business to continue operating sustainably.
Companies that are not regulated (unlike those operating in the carbon compliance market) take it upon themselves to offset a set amount of their emissions to operate and report more sustainably. These companies will purchase carbon credits in the voluntary carbon market (VCM).
Whether it’s a voluntary reduction to improve scores and ratings for sustainability certifications including EcoVadis or CDP (For example) or to offset residual emissions for sustainability reporting purposes, this time of year (February – April) is typically when the carbon markets see a significant increase in the purchase and retirement of carbon credits.
How does a company purchase carbon credits or I-RECs?
One carbon credit is equivalent to one ton of CO2e sequestered or avoided emission and One I-REC is equivalent to 1MWh of renewable energy. This is the first important rule to remember. Here’s a step-by-step guide on how companies typically purchase carbon credits:
- Determine carbon footprint and offset goals
Before purchasing carbon credits and I-RECs, companies should:
- Measure their carbon footprint
- Decide on how many emissions they want to offset (This varies from company-to-company, E.g. Scope 1 & 2, Scope 1,2 & 3)
TIP: Use globally recognised standards like GHG Protocol or ISO 14064. Use carbon credits to offset Scope 1 & 3 emissions and I-RECs to offset Scope 2 emissions.
- Select a carbon credit and I-REC supplier
Carbon credits can be purchased from:
- Originators: Project owners on the voluntary carbon market
- Brokers and traders
- Consultants: Some firms specialise in helping companies buy carbon credits (e.g., The Carbon Collective Company)
- Exchanges: Some stock exchanges offer carbon credits
I-RECs can be purchased from:
- Official I-REC marketplaces
- Brokers and Traders
- Renewable Energy Generators
- Consultants
TIP: Consider the long-term cost impact and efficiency while choosing a supplier.
- Consult with your carbon credit and I-REC supplier
- Get an understanding of the different credits available at different price points
- Understand the additional benefits to purchasing credits, including storytelling associated with the projects your credits originate from
- Does the purchase fulfil your regulatory obligations or other commitments?
TIP: One thing to consider is why the supplier is selling those credits and understand the value addition of the supplier.
- Verify the quality of carbon credits and I-RECs
To ensure credibility, companies should verify that carbon credits meet recognised standards, such as:
- Gold Standard (Focused on sustainability and social impact)
- Verified Carbon Standard (VCS) (The largest voluntary markets)
- Puro (Specialises in Carbon Di-oxide Removal credits- CDR)
- Global Carbon Standard (GCS) (MENA region’s first voluntary market)
- I-REC Standard (I-REC) (For regions without established Renewable Energy Certificates)
- European Guarantees of Origin (GOs) (Renewable electricity generated in Europe)
- North American Renewable Energy Certificates (RECs) (Renewable electricity generated in USA and Canada)
- China Green Electricity Certificate (GECs) (China’s official REC System)
TIP: Seek a consultant’s advice to make an informed decision
- Complete the purchase and retire the credits
- After purchasing, companies retire the credits in a public registry to claim the offset
- Some organisations publicly disclose their carbon credit purchases to enhance transparency and credibility
TIP: Ensure the quantity of purchase and timing of retirement are in line with external obligations such as your annual report, certifications, third-party ESG performance ratings, etc.
If you’d like help in sourcing carbon credits to offset your residual emissions
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