Renewable Energy Credits (RECs) vs. Carbon Offsets: A Guide for Illinois Businesses

As Illinois businesses increasingly commit to sustainability and climate action, understanding the instruments available to address environmental impact has become essential. Two terms dominate corporate sustainability discussions: Renewable Energy Credits (RECs) and carbon offsets. While often discussed together and sometimes confused, these are fundamentally different tools serving different purposes.

For Illinois businesses navigating sustainability commitments, investor expectations, and regulatory developments, clarity on these instruments matters. Using RECs and offsets appropriately supports credible environmental claims, achieves genuine impact, and avoids the growing risk of greenwashing accusations. Using them inappropriately—or making inflated claims—exposes companies to reputational damage and regulatory scrutiny.

This guide explains what RECs and carbon offsets are, how they differ, when each is appropriate, and how Illinois businesses can build credible environmental strategies using these instruments effectively.

Understanding the Fundamentals: What RECs and Carbon Offsets Actually Represent

Renewable Energy Credits (RECs): The Basics

A Renewable Energy Credit represents the environmental attributes of one megawatt-hour (MWh) of electricity generated from a renewable source—solar, wind, hydroelectric, biomass, or geothermal.

What a REC Is When a renewable generator produces electricity, two things are created:

1. Physical electricity—electrons flowing into the grid
2. Environmental attributes—the "renewable-ness" of that generation

These can be sold together or separately. The REC is a tradeable certificate representing the environmental attributes, distinct from the physical electricity.

How RECs Work

1. Renewable generator produces 1 MWh of electricity
2. REC is created and registered in a tracking system
3. REC can be sold with electricity (bundled) or separately (unbundled)
4. Buyer retires REC to claim renewable energy use
5. Retired REC cannot be sold again

What a REC Allows You to Claim A retired REC allows the holder to claim that their electricity consumption was matched by equivalent renewable generation. Specifically:

• "Our operations are powered by 100% renewable energy" (if RECs match consumption)
• "We purchase renewable energy certificates to support clean energy"
• Scope 2 emissions reporting as zero or reduced (market-based accounting)

What a REC Does NOT Represent

• Direct emissions reduction (electrons still come from the grid mix)
• Physical delivery of renewable electricity to your facility
• Additionality (the renewable project may have been built regardless)

Carbon Offsets: The Basics

A carbon offset represents one metric ton of carbon dioxide equivalent (tCO2e) that has been prevented from being emitted or removed from the atmosphere through a specific project.

What an Offset Is Carbon offsets are generated by projects that:

• Prevent emissions that would otherwise have occurred (avoided emissions)
• Remove carbon dioxide from the atmosphere (carbon removal)
• Destroy greenhouse gases with high global warming potential

How Offsets Work

1. Project developer implements an emissions-reducing or carbon-removing activity
2. Project is verified against an established standard
3. Emissions reduction or removal is measured and verified
4. Offsets are issued and registered
5. Buyer purchases and retires offsets against their own emissions

What an Offset Allows You to Claim A retired offset allows the holder to claim that they have "offset" or "compensated for" an equivalent amount of their own emissions:

• "Our operations are carbon neutral" (if offsets equal emissions)
• "We offset X tons of CO2 emissions"
• Progress toward net-zero commitments

Key Offset Quality Criteria For an offset to be credible, it should be:

• Additional—the emissions reduction wouldn't have happened without offset revenue
• Permanent—the carbon stays out of the atmosphere
• Verified—independently measured and confirmed
• Not double-counted—only one entity claims the benefit

Direct Comparison

Characteristic	RECs	Carbon Offsets
What it represents	1 MWh renewable generation	1 ton CO2e avoided/removed
Primary purpose	Clean electricity claims	Emissions compensation
Environmental benefit	Supports renewable market	Reduces/removes GHG
Typical price range	$1-5 (voluntary), $20-100 (compliance IL SREC)	$5-50 (voluntary), $100+ (high quality)
Verification	Tracking systems (M-RETS, GATS)	Standards (Gold Standard, Verra)
GHG Protocol use	Scope 2 market-based	Scope 1, 2, or 3 offsetting

RECs in Practice: How Illinois Businesses Access and Use Renewable Energy Credits

REC Market Structure

The REC market has two primary segments:

Compliance Markets Illinois has a Renewable Portfolio Standard (RPS) requiring utilities to source specified percentages of electricity from renewables. This creates compliance REC demand:

• SRECs (Solar RECs)—premium credits from solar generation
• Wind RECs—typically lower-cost wind generation credits
• Illinois-qualified—must meet state eligibility requirements

Illinois SREC prices have historically ranged from $50-100+ due to limited supply and strong compliance demand.

Voluntary Markets Businesses voluntarily purchasing RECs beyond compliance requirements:

• National wind RECs: $1-3/MWh
• Regional RECs (PJM, MISO): $2-5/MWh
• Solar RECs (voluntary): $3-10/MWh
• Community solar: Integrated with program

Ways Illinois Businesses Access RECs

Option 1: Direct REC Purchases Purchase RECs separately from electricity supply:

• Buy through brokers or aggregators
• Access to any available product
• Flexibility in quantity and timing
• Typical cost: $1-5/MWh for voluntary RECs
• Consider: Geography, vintage, certification

Option 2: Green Power Products Bundled electricity supply including RECs:

• Utility green tariffs (ComEd, Ameren)
• Competitive supplier green products
• Premium above standard supply rates
• Simplified procurement and verification
• May or may not be locally-sourced

Option 3: Community Solar Subscribe to Illinois community solar programs:

• Receive bill credits for solar generation
• RECs included (retained by subscriber)
• No on-site installation required
• 5-15% bill savings typical
• Growing availability in Illinois

For detailed community solar guidance, see our resource on community solar for businesses.

Option 4: On-Site Generation Install renewable generation at your facility:

• Solar PV most common for commercial
• You own RECs unless sold
• Physical production matches claims
• Highest credibility
• Significant capital investment

Option 5: Power Purchase Agreements (PPAs) Contract for renewable electricity including RECs:

• Physical PPA—direct delivery (limited in Illinois)
• Virtual/Financial PPA—contract for differences with REC transfer
• Long-term price certainty
• Additionality argument stronger
• Complexity and risk require sophistication

For corporate PPA guidance, see our resource on corporate PPAs for Illinois load with PJM projects.

Making Credible REC Claims

To ensure defensible sustainability claims:

Geography Matching

• Use RECs from the grid where your load is served
• For Illinois: PJM (northern) or MISO (central/southern) RECs
• National RECs are less credible for Illinois claims
• Same-region RECs reflect actual grid impact

Vintage Alignment

• Match REC vintage to consumption year
• Current-year RECs for current-year claims
• Avoid stockpiling old RECs

Tracking and Retirement

• Use recognized tracking systems:
  • M-RETS (Midwest Renewable Energy Tracking System)
  • PJM-GATS (Generation Attribute Tracking System)
• Retire RECs in your account
• Document retirement confirmation

Certification

• Green-e certification provides third-party verification
• Ensures RECs meet consumer protection standards
• Required by some corporate standards
• Adds credibility to claims

For guidance on green claims compliance, see our resource on green claims compliance with FTC and SEC when using RECs.

Carbon Offsets in Practice: Project Types, Standards, and Selection

Offset Project Categories

Nature-Based Solutions

Forestry—Avoided Deforestation (REDD+)

• Protect forests that would otherwise be cut
• Large-scale projects in tropical regions
• Concerns: permanence, leakage, additionality
• Price: $5-20/ton

Forestry—Afforestation/Reforestation

• Plant new forests on non-forested land
• Long time horizons for full carbon capture
• Concerns: permanence (fire, disease, harvest)
• Price: $10-30/ton

Improved Forest Management

• Enhanced practices in managed forests
• Extended rotation, reduced-impact logging
• More established methodology
• Price: $10-25/ton

Soil Carbon

• Agricultural practices increasing soil carbon
• Regenerative agriculture, cover crops
• Emerging methodology, measurement challenges
• Price: $15-40/ton

Industrial and Technological

Methane Capture—Landfills

• Capture methane from decomposition
• Well-established methodology
• High impact (methane 28x CO2 warming potential)
• Price: $5-15/ton

Methane Capture—Agriculture

• Livestock manure management
• Dairy, swine operations
• Proven technology
• Price: $10-25/ton

Industrial Gas Destruction

• HFC, SF6, N2O destruction
• Extremely high impact per unit
• Limited supply
• Price: $10-30/ton

Renewable Energy

• Wind, solar projects generating offsets
• Common in developing countries
• Additionality questions in developed markets
• Price: $3-10/ton

Energy Efficiency

• Efficient cookstoves, appliances
• Developing world focus
• Co-benefits (health, time savings)
• Price: $5-20/ton

Carbon Removal

Direct Air Capture

• Technology removing CO2 from atmosphere
• Highest permanence and measurability
• Currently expensive and limited
• Price: $400-1,000/ton

Biochar

• Pyrolysis of biomass, stable carbon storage
• Agricultural co-benefits
• Growing methodology acceptance
• Price: $100-250/ton

Enhanced Weathering

• Accelerated mineral carbonation
• Emerging approach
• Long-term permanence
• Price: $150-400/ton

Offset Quality Standards

Major verification standards:

Gold Standard

• Stringent additionality requirements
• Strong sustainable development criteria
• Popular with European buyers
• Higher price, higher confidence

Verra (VCS—Verified Carbon Standard)

• Largest voluntary market standard
• Broad project type coverage
• Standardized methodologies
• Widely accepted

American Carbon Registry (ACR)

• North American focus
• Strong forest carbon expertise
• Accepted by some compliance programs

Climate Action Reserve (CAR)

• North American protocols
• Regulatory-quality offsets
• California compliance linkage

Selecting Quality Offsets

Additionality Assessment Would the project have happened without offset revenue?

• Regulatory surplus test—goes beyond legal requirements
• Financial additionality—offset revenue necessary for viability
• Common practice—not standard industry practice
• Barriers analysis—identifies specific barriers offset revenue overcomes

Permanence Evaluation Will the carbon stay out of the atmosphere?

• Buffer pools—portion of offsets held as insurance
• Monitoring requirements—ongoing verification
• Reversal remediation—obligations if carbon released
• Highest for industrial/removal projects
• Lowest for nature-based (fire, disease, harvest risks)

Co-Benefits Consideration Additional positive impacts:

• Local community benefits
• Biodiversity protection
• Water quality improvements
• Health and social benefits

Vintage and Timing

• Match offset vintage to emissions year when possible
• Avoid very old vintages
• Consider project status (ongoing vs. completed)

Building Your Strategy: When to Use RECs vs. Offsets vs. Both

The Emissions Reduction Hierarchy

Credible sustainability strategies follow a hierarchy:

1. Reduce Emissions First Direct efficiency and operational improvements:

• Energy efficiency investments
• Process improvements
• Electrification where beneficial
• Behavior change programs

These provide real, permanent emissions reduction and typically save money.

2. Source Clean Energy Address scope 2 emissions through renewable energy:

• On-site renewable generation
• Power purchase agreements
• Green power products
• Community solar participation
• REC purchases (lower preference)

3. Offset Remaining Emissions After reduction and clean energy, offsets address residual emissions:

• Hard-to-abate direct emissions
• Scope 3 emissions from supply chain
• Aviation and other difficult categories
• Interim measure while developing reduction plans

GHG Protocol Framework

The GHG Protocol provides guidance on using RECs and offsets:

Scope 2 Accounting For electricity emissions, two methods:

• Location-based: Average grid emissions factor
• Market-based: Emissions based on procurement choices (including RECs)

RECs enable zero or reduced market-based scope 2 emissions reporting.

Offset Reporting Offsets should be reported:

• Separately from scope 1, 2, 3 emissions
• Not used to adjust gross emissions
• Disclosed with methodology and verification
• Presented as "compensated" or "offset" emissions

Scenario-Based Strategy

Scenario 1: Office-Based Service Company

Emissions profile:

• Scope 1: Minimal (vehicle fleet small)
• Scope 2: 500 MWh/year electricity
• Scope 3: Employee commuting, business travel, purchased goods

Strategy:

• Energy efficiency to reduce scope 2 baseline
• Green power product or community solar for 100% renewable
• High-quality offsets for business travel
• Long-term: EV fleet transition

Instruments:

• 500 RECs annually for renewable claims
• Travel offsets (Gold Standard aviation projects)

Scenario 2: Manufacturing Facility

Emissions profile:

• Scope 1: Significant (process heat, fleet)
• Scope 2: 5,000 MWh/year electricity
• Scope 3: Purchased materials, product use

Strategy:

• Process efficiency improvements (priority)
• Corporate PPA for renewable electricity (additionality)
• Electrification roadmap for scope 1
• Offsets for interim scope 1 until electrification
• Supply chain engagement for scope 3

Instruments:

• PPA with REC transfer (5,000 MWh)
• Verified offsets for remaining scope 1
• Scope 3 engagement program

Scenario 3: Multi-Location Retail

Emissions profile:

• Scope 1: Limited (HVAC refrigerants, vehicle deliveries)
• Scope 2: Variable across locations
• Scope 3: Product embodied carbon, customer travel

Strategy:

• Energy management across portfolio
• Community solar where available
• Bundled green power for remaining load
• Offset program for scope 1 and selected scope 3

Instruments:

• Mix of community solar, green power products, RECs
• Standardized offset program across locations

Avoiding Greenwashing

Claims Must Be Accurate

• Match instruments to claims
• Don't overstate impact
• Be specific about what you're doing
• Use recognized terminology correctly

Disclosure Matters

• Explain methodology in sustainability reports
• Identify REC sources and certification
• Name offset standards and project types
• Show year-over-year progress

Prioritize Reduction

• Don't offset instead of reducing
• Show reduction trajectory
• Explain role of offsets (interim, residual)
• Set reduction targets separate from offsets

External Verification

• Third-party assurance for claims
• Use certified instruments
• Participate in recognized initiatives
• Enable stakeholder verification

For comprehensive green tariff guidance, see our resource on green tariffs and RECs for corporate ESG in Illinois.

Conclusion: Informed Choices for Real Impact

RECs and carbon offsets are powerful tools for Illinois businesses committed to sustainability—when used appropriately. Understanding the fundamental differences between these instruments, their strengths and limitations, and how to deploy them credibly enables companies to make genuine environmental progress while supporting defensible claims.

Key principles for Illinois businesses:

1. Understand what you're buying: RECs represent renewable electricity generation; offsets represent emissions avoided or removed. They address different things and serve different purposes.

2. Follow the hierarchy: Reduce emissions first, source clean energy second, offset residual emissions third. Don't use offsets as a substitute for action within your control.

3. Prioritize quality: Not all RECs and offsets are equal. Geographic matching, vintage alignment, verification standards, and additionality all matter for credibility.

4. Be transparent: Disclose what you're doing and how. Stakeholders increasingly demand transparency, and regulators are paying attention to environmental claims.

5. Build toward real solutions: Use market-based instruments as part of a trajectory toward genuine decarbonization, not as permanent substitutes for change.

The landscape of corporate sustainability is evolving rapidly. Businesses that build credible programs today—grounded in real action supported by appropriate use of RECs and offsets—position themselves for success as expectations and requirements continue to tighten.

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Sources:

• GHG Protocol Scope 2 Guidance
• Green-e Energy National Standard
• Gold Standard Foundation
• Verra—Verified Carbon Standard
• Science Based Targets Initiative