It examines the basic rationale for using such instruments, and their advantages. It also describes the existing markets for TRECs in Canada, in North America, and internationally.
Key Messages:
- Tradable Renewable Energy Certificates (TRECs) are a non-tangible, tradable commodity that represent proof that one megawatt-hour (MWh) of electricity was generated from a renewable energy resource. Two main markets exist for TRECs: voluntary markets, in which consumers seek to demonstrate they are using “green” electricity, and compliance markets, in which energy suppliers need to provide a certain percentage of renewable power to meet the requirements of renewable portfolio standard (RPS) policies.
- Voluntary markets currently exist in Canada, facilitated by existing tracking and certification systems that ensure TRECs are not double counted and provide additional renewable capacity. However, unlike Europe and the United States, Canada does not have compliance markets for TRECs. Compliance markets are facilitated by state-level RPS policies in the US, and various national RPS policies in Europe (including green certificate obligation policies). Canadian policy-makers have tended to use other policy approaches to promote renewable energy.
- The variation between TREC systems and RPS policies across jurisdictions poses a challenge for a more integrated – and more liquid – TRECs market. In the US, differences between state-level programs have resulted in a fragmented and complex TRECs marketplace. Prices for TRECs have varied substantially over time, across jurisdictions, and aredependent on the specific attributes of an individual TREC (including the vintage, source, and location of the renewable resource).
- Interactions between voluntary and compliance TRECs markets, and between TRECs markets and other renewable energy policy instruments, can be complex. Policy must be designed to avoid double counting and be transparent about the conditions under which renewable energy projects receive support from multiple policy instruments.
