Renewable Energy Credits (RECs) are a relatively new financial instrument that help to stimulate the renewable energy market through capturing the premiums for environmental attributes associated with electricity, hopefully, encouraging investment in new renewable energy projects. However, lack of standardization in both the definition of RECs and the ways that RECs can be exchanged and administered has led to confusion on the parts of all concerned—the REC seller, the REC buyer, regulators, and the public at large—stymying investment in renewable energy projects and creating market inefficiency. Much like inconsistent accounting definitions or divergent requirements for providing investment guidance to consumers would cause negative externalities in a market, inconsistent definitions of RECs impede the marketplace from receiving the anticipated gains from trading RECs in a purely liquid market.
Why the Renewable Energy Credit Market Needs Standardization,
13 Wash. J. L. Tech. & Arts
Available at: https://digitalcommons.law.uw.edu/wjlta/vol13/iss1/5