Carbon offsets are certificates representing the reduction of one metric ton of carbon dioxide. Many companies and individuals choose to purchase carbon offsets to reduce their carbon footprint. The companies selling offsets typically achieve them through the production of renewable energy, energy efficiency programs, or forestry projects. The certificates represent the social and environmental attributes of the carbon reduction, and the money from the sale of the carbon offsets typically funds further carbon-reducing projects.
Carbon offsets are similar to but fundamentally different from renewable energy certificates. RECs, also known as green tags, are a tradable commodity in many jurisdictions that guarantees 1 MW of energy was produced from a renewable resource such as wind or solar. Producers of a renewable energy resource are awarded a certificate for every 1MW of power produced. Like carbon offsets, the certificates can be sold on the open market to consumers who want to offset their carbon footprint. Much of the revenue from the sale of renewable energy certificates is used to fund new renewable energy projects or subsidize the price of existing projects. In states with Renewable Portfolio Standards, energy companies can use certificates to meet the mandated renewable energy production standard.
Alaska has no renewable energy portfolio standard; therefore all renewable energy certificates in the state are traded on a voluntary basis.
Cordova Electric Cooperative
Environmental Protection Agency