Carbon credits, the imperfect balm to blur the carbon footprint

RECs, certified by which green energy equivalent to the CO2 produced is generated, can be a lever for renewables… if executed rigorously

It is not necessary to have a photovoltaic or wind installation for a company to combat the greenhouse gas emissions generated by its activity. By purchasing emission reduction certificates (CERs) or guarantees of renewable origin (GdO), it is possible to mitigate the impact on the environment without having to sign a power purchase agreement (PPA), an agreement that serves to directly acquire the electricity produced by a renewable park.

This is the theory behind these instruments, CER and GdO, which are increasingly common on the road to making the European Union carbon neutral, that is, there is a balance between the amount of greenhouse gases produced and the amount removed from the atmosphere. “The GdO are to determine that the electricity you receive is renewable, while if you want to reduce your carbon footprint you have to use CER,” explains Nacho Bautista, CEO of Fundeen, a crowdfunding platform focused on renewable energies.

One example is this year’s edition of Spain’s Acciona Open golf tournament, which offsets the emissions produced during the competition with CER certificates issued by Acciona wind farms in developing countries. “The golf course and the tournament have an ‘x’ carbon footprint and have reduced it to zero by buying the CERs of the Acciona complexes,” explains Germán Palomo, managing partner of the energy consultancy Advanced Energy Consulting (AEC).

Explained in another way, this means that once the tournament is over, the CO2 emissions it has produced are calculated and compensated with the generation of clean energy in renewable facilities in other parts of the planet. The generation of this green energy, which is paid through CERs, is injected into the grid of the country in which the complex is located to avoid the production of electricity by burning fossil fuels. This is how CERs seek to mitigate CO2 emissions into the atmosphere.

“You can reduce emissions anywhere in the world and that contributes to the fight against climate change. From that point of view of_CO2 emissions, it doesn’t matter if it happens here or there,” says Pedro Linares, a professor at Comillas Pontifical University. However, one of the problems of these CERs is to demonstrate that the renewable complex that is being paid is actually going to generate additional energy to what it would produce if it did not sell those certificates. “The problem is how reliable it is that this installation is going to generate additional energy than it would produce under normal conditions, that is, without the CERs. If this criterion of additionality is demonstrated, then it is offset by the_CO2 emissions that have already been made,” explains Linares. Precisely, that is another problem with these certificates because they compensate with clean energy the_CO2 that has been emitted by an activity, but they do not absorb it.

Meanwhile, a positive point of these certificates is that they can be useful for developing projects that would otherwise not be profitable. “Imagine that you want to build a wind farm and that the operating costs are higher than what you pay to generate energy. In this case, selling CER to produce clean energy is an additional source of income,” says Professor Linares.

“It’s extra income. The more this market grows, the more relevant it will be,” says Palomo, from the AEC consultancy. “Currently, renewable parks can increase their income statements thanks to the generation and commercialization of these RECs,” says Germán García, head of Net Zero Advisory Sustainability and Good Governance at KPMG Spain, who comments that this type of certificate is already a developed market in Spain and internationally.

However, Garcia has doubts about the future of these certificates. “As an instrument to advance in the decarbonization of the economy, CERs lose meaning since they do not prevent the accumulation of greenhouse gases in the atmosphere, unlike certificates from absorption projects that really guarantee that the annual contribution to the accumulation of greenhouse gases in the atmosphere is 0 when removing the emissions produced”, Explains. For García, the CERs will lose value because it is not a valid mechanism to neutralize emissions. “For this reason, its value will be devalued compared to certificates from emission absorption projects, its demand will be reduced in Spain, and worldwide, as we approach 2050 and finally they will gradually disappear from carbon markets,” says the expert.

Source: ABC