What are they and how are they different from each other?
RECs vs Carbon Credits
Introduction
Your business may be switching off lights after hours, setting air-conditioning temperatures carefully and upgrading older equipment. These steps matter, but electricity use cannot be eliminated completely.
If your business is looking to go further, Renewable Energy Certificates (RECs) and carbon credits can be useful additions to your wider sustainability strategy. Below, we break down what RECs are, how carbon credits compare, and which may be more relevant to your business.
Key takeaways
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Renewable energy certificates (RECs) and carbon credits both contribute to reducing greenhouse gas emissions, but they serve different purposes.
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A REC represents the attributes of 1 megawatt-hour (MWh) of electricity generated from a renewable source.
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A carbon credit represents 1 tonne of carbon dioxide equivalent that has been reduced, avoided or removed through a verified project.
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Businesses with significant electricity use may find RECs particularly relevant, while carbon credits can be useful for emissions from areas such as transport, operations and supply chains.
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For many organisations, the most practical approach is to reduce emissions where possible, then use RECs and carbon credits for the areas that remain harder to address.
RECs vs Carbon Credits: Key differences
1. What each one measures
A REC represents 1 megawatt-hour (MWh) of electricity generated from an eligible renewable source, such as solar or wind. A carbon credit represents 1 metric tonne of carbon dioxide equivalent that has been reduced, avoided or removed through a verified project.
Put simply, RECs are linked to the generation of renewable electricity, while carbon credits are linked to emissions reductions or removals.
2. How businesses use them
Businesses usually use RECs when they want to support a claim for the renewable energy they buy and use. Once the RECs are properly sourced and retired, the business can show that an equivalent amount of its electricity consumption has been matched with renewable electricity generation.
Carbon credits are used for a different purpose. They allow businesses to support verified projects that reduce or remove emissions elsewhere, such as forest restoration, methane capture or carbon removal projects.
3. How they fit into reporting and claims
RECs are most relevant to purchased electricity. Under the Greenhouse Gas (GHG) Protocol, emissions linked to the electricity, steam, heating or cooling a business buys and uses are reported under Scope 2.
Businesses can report their Scope 2 emissions in two ways: using the average emissions of the local grid, or using a market-based method that takes eligible contractual instruments into account. Properly sourced and retired RECs can be used under this market-based method
Carbon credits support a different type of climate claim. They are useful when a business wants to contribute to verified emissions-reduction or carbon-removal projects beyond its own electricity use. This can include projects such as forest restoration, methane capture, cleaner cooking initiatives, or carbon removal solutions.
For businesses with emissions that are harder to reduce immediately, carbon credits can form part of a broader sustainability strategy while longer-term reduction plans are put in place. The key is to ensure that the project is credible, the emissions impact is clearly measured, and the claim accurately reflects what the carbon credits support.
4. Where they need to come from
The source of a REC matters. To support a credible renewable electricity claim, the REC should generally come from the same market boundary as the electricity being consumed, or otherwise meet the requirements of the reporting framework being used. For a company operating in Singapore, this means looking at where the renewable energy credit was generated, which registry tracks it, and whether it is suitable for the claim being made.
When the relevant quality criteria and claim requirements are met, RECs may also support market-based Scope 2 reporting. However, simply buying or retiring a REC does not automatically change a company’s reported Scope 2 emissions. The certificates must be used in line with the reporting framework, with clear documentation to support the claim.
For this reason, businesses should refer to official frameworks such as the Singapore Standard SS 673, which guides how RECs should be handled.
Carbon credits are generally more flexible in terms of location. A business in Singapore may choose to support a verified emissions-reduction or carbon-removal project in another country, as greenhouse gas reductions can contribute to global climate action regardless of where they take place. However, you should still assess the quality of the project carefully, including how its emissions impact is measured, verified and recorded, before making any public claims about it.
When should your business use RECs or carbon credits?
Use RECs when electricity is the main focus ⚡️
RECs are generally more suitable when your business wants to address the emissions linked to the electricity it buys and uses. This may apply to businesses where electricity is a significant part of day-to-day operations, such as:
- Offices
- Retail outlets
- Warehouses
- Factories
- Data centres
They can also be particularly useful for organisations that cannot install solar panels on-site. A tenant may not own the building, have access to the rooftop or be able to make changes to the site’s electrical setup. In these cases, buying RECs can offer a more practical way to bring renewable electricity into the business’s sustainability plans without waiting for a major upgrade or installation.
At Flo Energy, we’re here to help simplify the process. We’ll source, verify, and retire locally generated RECs accredited under global registries like Xpansiv I-REC and TIGR Registry, based on your business’s electricity use and reporting needs. You can also choose recurring purchases for ongoing ESG reporting, or a one-time purchase for part reporting periods, with Flo handling the certificate administration and redemption along the way.
Use carbon credits for emissions beyond electricity use 🌱
Carbon credits may be more relevant for organisations whose emissions come from a wider range of sources beyond electricity. This can include:
- Logistics companies
- Manufacturers
- Airlines
- Construction firms
- Businesses with extensive supply chains and transportation needs
They can also be useful if you have already taken steps to improve energy efficiency but still have emissions that are difficult to eliminate in the short term. In these cases, carbon credits allow your business to support verified climate projects while you continue to work on longer-term reductions.
Use both for a more complete sustainability strategy
For many businesses, RECs and carbon credits can work alongside each other rather than being an either-or decision. RECs can help address purchased electricity, while carbon credits can support wider climate action for emissions that remain difficult to reduce.
A practical approach may be to:
- Reduce unnecessary energy use first
- Use RECs for purchased electricity
- Take steps to lower fuel, transport and supply chain emissions
- Consider high-quality carbon credits for remaining emissions that cannot yet be avoided
This helps create a more balanced sustainability strategy, rather than relying on one tool to address every part of a business’s carbon footprint.
Conclusion
RECs and carbon credits can both support meaningful climate action, but only when they are used for the right purpose and backed by clear, reliable documentation. For businesses looking to address purchased electricity, RECs offer a practical way to move beyond efficiency measures alone and make credible progress towards renewable electricity goals.
As Singapore’s largest independent electricity provider, Flo Energy helps businesses take that step with greater confidence. From sourcing verified local RECs to managing verification, retirement and reporting support, we help businesses turn electricity use into a renewable energy claim you can stand behind.
Speak to Flo Energy to find a solution that fits your unique needs today.