Originally printed on CleantechBlog.com

RECs and carbon credits are a GOOD thing, so stop bashing them.

As an example a few months ago Inside Greentech had an article attacking renewable energy credits, singling out one such purchase by Wells Fargo, and comparing them to the indulgences sold by the Catholic Church to save your soul in the middle ages.

“In the 16th-century church, those who were long on cash but short on righteous living could balance the equation by buying “indulgences”, representing a sort of absolution for sinful behavior.

Indulgences may have disappeared about the time of Martin Luther, but they seem to be alive and thriving in a more contemporary religion - the Church of the Green.”

I find this rather exasperating.

All renewable energy, carbon and energy efficiency credits are, is a simple derivative.

Devolving the “power” produced by one company into its components a) the electrons, b) the “green strip”, c) the “low carbon strip” (though often for conservatism only one of b or c can often be claimed), and selling these components to different users.

There is nothing more wrong or complex here than is done with collateralized mortgages and exchange traded funds everyday on Wall Street. The only caveat is ensuring you don’t sell the same thing twice, but that’s what certifications and audits are for.

By defining the property rights for the green portion of the power as separate and detachable (just like oil and gas mineral rights and water rights are detachable from land ownership) from the electron stream, we enable the market to act more efficiently, give the consumer choice, and change the world for the better.

It’s not a matter of asking why a company should be permitted to make or sell a credit. The real question should be, why can’t I? If I’m the producer, it’s my power, I can split it up anyway I want as long as my customer agrees. Once it is in the grid, the electrons don’t care. And as a buyer, if my current provider won’t sell me green power because they don’t produce enough (and in a regulated world I don’t have a choice about who to buy from), I can buy my electrons from my regulated provider, and buy the green power portion from a third party who does makes the product I want, but whose electricity customer doesn’t care or won’t pay as much as I will.