Editor’s note: This is the second part of Earth911’s introduction to carbon offsets and renewable energy certificates. You can use these two financial tools to change your carbon footprint and, by asking how companies meet their CO2 emissions goals, determine whether “green” products are actually contributing to carbon dioxide (CO2) reductions. In part one of this series, we introduced these tools. This installment focuses on how to use them successfully, because many carbon offset programs, in particular, are not legitimately sustainable.

Renewable energy credits (RECs, or “wrecks”) and carbon offsets have been promoted as useful tools to help you reduce your home and purchasing CO2 footprint. However, mounting evidence suggests that you should proceed with extreme caution, especially when purchasing carbon offsets, as companies often fail to deliver consistent CO2 Reduction results. Both RECs and carbon offsets, while theoretically beneficial, face intensifying criticism and controversy in 2025.

RECs represent a megawatt-hour (MWh) of renewably produced electricity, while carbon offsets represent a ton of carbon that will be sequestered (locked into a material or placed underground) to remove it from the atmosphere. Concerns about both RECs and offsets revolve around two major issues: moral hazard and legitimacy.

Carbon Offsets Under Fire

Recent research has exposed systemic problems in the voluntary carbon market. A 2024 study in Nature Communications examining the twenty largest corporate buyers found that 87% of purchased offsets carry a high risk of not providing real and additional emissions reductions. Even more damning, an unpublished study cited by CarbonBrief suggests that only 12% of offsets sold result in “real emissions reductions.”

A study published in Science found that 94% of scrutinized forest carbon offsets were non-performing, with avoided-deforestation projects grossly overstating their climate mitigation impacts. Research on REDD+ projects—a United Nations climate mechanism that pays developing countries to protect their forests and reduce carbon emissions from deforestation—showed that only 6% of the total carbon offsets produced by 18 projects were valid.

The market continues to expand despite these quality issues. The global voluntary carbon offsets market was valued at $0.8 billion in 2024 and is projected to reach $9.66 billion by 2033, growing at 31.2% annually. This growth will likely be driven by corporate net-zero commitments rather than environmental effectiveness.

RECs: Better but Not Perfect

The renewable energy certificate market shows more promise. The REC market was valued at $20.9 to $24.3 billion in 2024 and is expected to grow to $58-103 billion by 2030-2034. Voluntary renewable energy certificates were set to overtake government targets in 2024, indicating strong corporate demand.

However, RECs face criticism, too. Critics argue that RECs enable “greenwashing” because companies can purchase RECs and claim to have renewable operations while continuing to use fossil fuels and emitting the same emissions. A 2024 study reviewing nearly 40 years of data argues that RECs tend to discourage companies from innovating to produce cleaner energy compared to other policies, such as environmental taxes.

Won’t Get Fooled Again

Concerns about moral hazard and the creation of an attractive alternative that encourages undesirable behavior are well-founded. At Earth911, we encourage you to consider trade-offs when making any environmental decision, but with a careful eye to your bottom-line CO2 output. For instance, if you switch to an electric vehicle, you will dramatically reduce your carbon footprint if you charge your EV only with renewable energy—by approximately 50% compared to internal combustion engines, with half the lifecycle emissions of an equivalent gas car. But that does not justify increasing your meat consumption, which could cancel out most of the reduction.

Moral hazards suggest that if you act, paying the cost of a change, someone else can absorb your change in their carbon totals and claim to be producing less CO2. Carbon offsets are particularly prone to this problem. For a small incremental cost, a polluting energy company can purchase your offset carbon and use it to emit more CO2. Unfortunately, the definition of falling prey to a moral hazard was demonstrated by the United Nations, which claimed in a video ad that was pulled due to criticism that people can “keep calm and offset.” The plain fact is that we need to reduce CO2-producing activities rather than shifting them around; any REC or carbon offset must result in a net decrease in CO2 overall, not just in one sector, such as the energy sector. Lowering your carbon emissions when driving but increasing them when you eat doesn’t help.

Legitimacy issues are related to questions about whether carbon dioxide is actually removed from the atmosphere. For example, as a consumer, you often have limited insight into how carbon offsets are handled. You may pay extra for your plane ticket to offset the carbon produced by your trip, but can you be sure your airline is investing in the right types of projects to offset your carbon footprint?

Carbon offsets are typically unverified and unenforceable. Research on India’s Clean Development Mechanism found that at least 52% of approved carbon offsets were allocated to projects that would have been built anyway, resulting in increased global emissions rather than reductions.

Before you purchase a carbon offset, make sure you’ve done your homework. Is this a reputable company with transparent practices? Can you verify that they’re taking carbon offset efforts in line with an actual reduction in environmental damage?

Terrapass, a company that has had legitimacy issues with its offsetting in the past, has established a solid tracking program and closes out all its carbon offsets by confirming that they have been sequestered. So, every offset purchased is returned to the ground or locked in a substance that will not release it for centuries, including trees and carbon sequestration technologies. Individuals can easily purchase Terrapass carbon offsets.

REC’d Expectations

There have also been a few points of controversy surrounding RECs. The concern is that dirty energy producers and consumers, such as large websites or banks, can trade RECs purchased from a clean energy source to offset their CO2 emissions elsewhere. The trade-off is difficult to track because RECs are traded like stocks — there is a price attached, and once transferred, the savings appear to be lost. However, RECs represent carbon that would not have been produced in the first place, so they are generally beneficial for the environment. Your cost is the markup for creating and handling the REC, which is analogous to the fees a stock brokerage charges when you buy or sell shares of stock.

When you purchase a REC, such as by enrolling in a green energy program, you acquire the right to use a MWh of renewable energy.  Terrapass and Arcadia Power, among others, have created virtual grids that allow solar power producers to sell their RECs to consumers. The grid is “virtual” because it moves the REC carbon from the source to a consumer who could be located across the country, allowing the consumer to consume only renewable energy through a complex credit-trading process. Essentially, RECs enable your utility to trade clean energy for dirty energy, resulting in a net reduction in the production of dirty energy, as there is no demand for dirtier electricity.

RECs are not simple, alas. It is easy to see the trade of a coal-produced MWh of energy for a clean MWh as an exercise in rearranging deck chairs. But RECs make a significant difference by allowing people and companies that want to use clean energy to purchase it.

No Time for Inaction

The challenge, of course, is that we don’t have time to wait for the long run to play out. We need to combine the tools we have available — including our ability to make informed choices about the sources of power we use (RECs) and the sequestration of carbon we produce (carbon offsets), the marketplace where our values can be priced, and the integrity and transparency of that marketplace — to create massive overall reductions in CO2 emissions.

When you buy a car, the manufacturer of your vehicle has already produced between six and 25 tons of CO2, which you can offset by purchasing carbon offsets that are retired. If the carbon offset is not retired, as Terrapass does each year, the CO2 will remain in the atmosphere. After accounting for production-related CO2, you still face offsetting the 19.59 pounds of CO2 produced by each gallon of gas you burn. If you own an electric vehicle, your car still represents at least six tons of CO2 that can be offset with a legitimate offset purchase. You can also offset your gasoline-burning CO2 emissions with carbon offsets, and Terrapass offers plans tailored to specific situations.

You can use RECs to buy your own clean power, but another way they can serve your interest in a cleaner economy is by checking that the companies you buy from use RECs to access clean power. For example, if Google purchases a REC to offset its remaining non-renewable energy use, it yields a net environmental improvement. You can review companies’ sustainability statements to learn more about how they buy and use electricity, a topic that may be explored in a future report.

Our Updated Recommendations

Here are our tips to apply when making a REC or carbon offset choice in 2025:

Extreme skepticism for offsets: Given that 87% of major corporate offset purchases carry a high risk of not providing actual reductions, and only 12% of offsets may result in real emissions reductions, consider offsets a last resort after reducing your emissions.

Demand transparency: Require year-end confirmation about the handling of your carbon offsets. Were they retired or sold? If they were sold, the offset was likely lost to a dirty producer. Many REDD+ projects fail to provide sufficient information for third-party verification.

Prioritize direct reduction: Avoid morally hazardous choices. Focus first on actual emission reductions: switch to electric vehicles (where feasible), reduce meat consumption, improve home energy efficiency, and choose renewable energy directly.

RECs over offsets: When purchasing environmental credits, favor RECs over carbon offsets. While RECs have limitations, they represent renewable energy that exists and was generated, unlike many questionable offset projects.

Verify REC handling: Ask your REC seller to provide an accounting of how your REC was consumed. Remember that offsets of dirty power are to be expected but that the goal is to reduce CO2 overall.

Become a producer: Don’t just think about buying RECs; consider generating clean energy with solar or wind power at home. You can eliminate your consumption of dirty energy and even sell your excess power.

The Bottom Line

Prominent environmental organizations, including ClientEarth, ShareAction, Oxfam, Amnesty International, and Greenpeace, have issued joint statements condemning carbon offsets, arguing that relying on offsets deflects attention from critical emission reductions at the source.

The evidence is clear: RECs maintain some legitimacy as a transitional tool, but the carbon offset market is fundamentally broken. The smart move for folks concerned about reducing their impact is a focus on direct emissions reductions first, using RECs cautiously as a supplementary tool, and treating carbon offsets with extreme skepticism. The climate crisis demands real action, not accounting tricks.

Editor’s Note: Originally published on August 14, 2019, this article was substantially updated in July 2025.