Environmental commodities
Energy Attribute Certificates (EACs)
What is an EAC?
An Energy Attribute Certificate (EAC) is a tradable certificate representing the environmental attributes of electricity generated from renewable resources. EACs are often also referred to as Renewable Energy Certificates (RECs). Primarily employed to verify the renewable energy content of electricity, an EAC of 1MWh of renewable electricity denotes the environmental advantages of 1MWh of electricity generated from renewable energy sources like solar or wind.
Why are EACs Important?
EACs allow companies to reduce their environmental footprint by endorsing clean energy, all without the necessity to switch their current power provider. Not only do EACs serve as a key instrument for aligning with the Greenhouse Gas Protocol and improving corporate sustainability ratings in line with RE100 goals, but they also provide an efficient means to integrate renewable energy into a global sustainability strategy. For corporations endeavoring to attain RE100, EAC procurement is imperative. Unless a company is internally generating renewable energy, achieving RE100 without EAC procurement is exceedingly challenging. To add on, many firms are actively acquiring EACs to mitigate their Scope 2 GHG Emissions, which predominantly originate from electricity consumption.
Types of EACs
Country (Region) Specific Nature of EACs
EACs are country-specific. This means that if an organization intends to claim renewable energy use in a specific country or region, it is necessary to procure EACs specific to that country or region. For example, a company operating across 12 countries can only assert its use of renewable energy if it purchases and redeems EACs from all 12 regions where electricity is consumed.
How to Trade EACs
There are the three main ways for a company to buy and sell EACs
Over-the-counter (OTC)
This involves trading EACs directly with another company or individual. OTC trading is typically done on a one-off basis, and the price of EACs is negotiated between the two parties.
Aggregator
An aggregator is a company that acts as a middleman between buyers and sellers of EACs. Aggregators typically have a large network of buyers and sellers, which can give companies better prices on EACs through bulk purchasing.
Exchange or Marketplace
This involves trading EACs on an exchange or a marketplace. Exchanges and marketplaces provide a platform for buyers and sellers of EACs to meet and trade. The price of EACs on an exchange or a marketplace is determined by supply and demand.
What Happens After Buying and Selling the EACs?
Once the transaction is confirmed, the seller typically transfers the EACs to the buyer through an agreed-upon registry (for I-RECs, the registry is Evident), or the sellerretires/redeems the EACs on behalf of the buyer or on another agreed-upon beneficiary.
A company can only claim to have used Renewable Energy if that company retires/redeems the purchased EACs in their name. Traders or other parties can retire/redeem EACs on behalf of other beneficiaries, but only the entity in which the EACs were retired/redeemed in can officially claim that they have used renewable energy. Retiring EACs is a voluntary process and once they are retired, the EAC issuer will then cancel the EACs and remove them from circulation to avoid "double-counting” In other words, once an EAC is retired, the EAC cannot be further traded.
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