Corporate climate action has moved past the era of green promises. In 2026, stakeholders demand evidence of measurable progress. Two frameworks now lead this movement: the Science Based Targets initiative (SBTi) and the global push for Net-Zero emissions
These frameworks provide a technical roadmap for companies to align with the Paris Agreement, a legally binding international climate change treaty adopted by 196 parties at the COP21 conference in 2015.
A central tool in this roadmap is the Green Energy Credit, also known as a Renewable Energy Certificate (REC).
This article explains how green energy credits function as a primary mechanism for achieving science-based climate goals.
Key Takeaways
- Green Energy Credits (RECs) are the standard market-based instrument used to prove the consumption of renewable electricity and address Scope 2 emissions.
- The Science-Based Targets initiative (SBTi) officially recognizes RECs as a method for emission reduction, rather than merely as offsets, within its 1.5°C-aligned framework.
- RECs must meet geographic and temporal matching requirements to ensure the energy was generated on the same local grid.
- While RECs are essential for achieving near-term and long-term reduction targets, they cannot be used for the final neutralisation phase of Net-Zero.
- In fragmented markets such as the Asia-Pacific, adherence to standards such as Singapore’s SS 673 ensures that green energy procurement is transparent and globally compliant.
Understanding Green Energy Credits (RECs)
A Renewable Energy Certificate (REC) serves as evidence that 1 megawatt-hour (MWh) of electricity was generated from a renewable source and delivered to the power grid. These sources typically include solar, wind, hydro, and biomass.
It is important to distinguish RECs from carbon offsets.
- Carbon offsets represent the removal or avoidance of one metric tonne of carbon dioxide equivalent from the atmosphere. They are often used to address Scope 1 or Scope 3 emissions.
- In contrast, RECs specifically address the environmental attributes of electricity generation. They are the standard tool for managing Scope 2 emissions.
RECs work through an unbundled mechanism. When a renewable energy plant produces power, the physical electricity and the environmental attributes are separated.
The physical electricity enters the local grid and mixes with power from other sources.
The environmental attribute is captured in the REC.
By purchasing and retiring these certificates, an organisation can legally claim that its electricity consumption comes from renewable sources.
Reduce vs Offset vs Neutralise: An Important Distinction
“Reduce,” offset,” and “neutralise” are key terms used in the SBTi framework that might sound similar, but they shouldn’t be used interchangeably.
Here’s how these terms differ from each other:
Reduction
This refers to the actual decrease of greenhouse gases (GHG) released from your business’s own operations or supply chain. It is owning your footprint and shrinking it at the source.
Offsetting
These are actions taken outside your company’s boundaries to compensate for the emissions you are still releasing. It is balancing the scales.
Neutralisation
Neutralisation is the term for offsetting emissions that cannot be eliminated.
This involves direct air capture (DAC), in which carbon dioxide is drawn directly from the air and processed into a form that doesn’t harm the environment.
RECs might seem like an offsetting effort, since you’re claiming a certificate based on the REC provider’s own sustainable efforts. However, auditors count RECs as Scope 2 reductions rather than offsets.
The SBTi Framework: The Gold Standard for Climate Action
The overarching goal of the SBTi framework is to provide companies and financial institutions with a clearly defined, scientifically rigorous roadmap to reduce their greenhouse gas (GHG) emissions.
Rather than setting arbitrary sustainability goals, companies use the SBTi to ensure their climate action is science-based. This means that actions should align with the decarbonisation required to limit global warming to 1.5°C above pre-industrial levels, as mandated by the Paris Agreement.
The SBTi Corporate Net-Zero Standard is the world’s first framework for setting corporate net-zero targets. It involves the following science-based targets:
- Near-Term Targets (5–10 years): Companies must commit to roughly halving (i.e., reducing) their emissions by 2030.
- Long-Term Targets (by 2050): A commitment to reduce all possible emissions across Scopes 1, 2, and 3 by at least 90%.
- Neutralisation of Residual Emissions: Only after achieving a 90% reduction can a company use permanent carbon removals (such as direct air capture) to neutralise the remaining 10% that cannot be eliminated.
- Beyond Value Chain Mitigation (BVCM): While not counted toward the 90% reduction target, companies are encouraged to fund climate projects outside their operations (e.g., forest conservation) to take responsibility for the carbon they continue to emit during their transition.
How RECs Directly Enable SBTi Compliance
There are various areas in which RECs can help companies meet their science-based targets.
Near-Term Targets (5–10 years)
The near-term science-based target requires companies to halve their emissions by 2030.
By purchasing RECs, the SBTi sees this as an effort to reduce emissions. As a result, RECs contribute significantly to this science-based target.
Long-Term Targets (by 2050)
To meet the long-term targets, companies must reduce their Scope 1, 2, and 3 emissions by 90%.
RECs address Scope 2 emissions.
RECs assure the SBTi that, if a company consumes 1,000 MWh of electricity, it can purchase 1,000 MWh of RECs. This allows the company to report its Scope 2 emissions as zero.
Local Decarbonisation
To ensure RECs result in actual grid changes, the 2026 SBTi standards now require Geographic and Temporal Matching.
This means your RECs must be from your local grid and from the same year, thereby supporting local decarbonisation.
For example, a facility in Singapore must use RECs generated within the Singapore market or the interconnected regional market. Asiarecs helps businesses navigate these regional boundaries to ensure their credits are eligible for SBTi reporting.
Can RECs Help with Neutralisation?
Although RECs provide significant value for near- and long-term targets, they cannot be used for neutralisation.
Neutralisation specifically requires Carbon Removal Credits (such as Direct Air Capture or Reforestation) that physically remove CO2 from the atmosphere.
A REC demonstrates that you used clean energy; it does not remove existing carbon from the atmosphere. Therefore, it cannot be used to neutralise the final 10% of emissions.
However, a REC can still help you reduce your emissions by 2030 and meet your long-term Scope 2 targets.
The Journey to Net-Zero: Bridging the Gap
Achieving Net-Zero requires a strategic hierarchy of action. This is often described as the “Reduce, Replace, Neutralise” strategy.
Reduce
The first priority is always operational efficiency. Companies must reduce their total energy demand through improved technologies and more efficient processes. This reduces the total volume of emissions that must be addressed.
Replace
The second priority is replacement.
This involves transitioning from fossil-fuel energy to renewable energy.
Many companies cannot install enough on-site solar panels to power their entire operations. In these cases, RECs act as the essential replacement tool. They allow a company to support large-scale renewable projects off-site while claiming the green attributes for their own reporting.
Neutralise
The final stage is neutralisation. After a company has reduced its emissions by 90 percent or more, residual emissions may remain that are impossible to eliminate. These must be neutralised using permanent carbon removals.
RECs are the bridge that helps companies reach that final 10 per cent threshold by efficiently managing their Scope 2 footprint during the transition.
Navigating the APAC Landscape with Asiarecs
Unlike the unified markets of Europe or North America, the APAC region is highly fragmented. Countries such as Singapore, Malaysia, Vietnam, and Indonesia have distinct regulations, grid structures, and registry requirements.
SBTi and other global frameworks demand that credits be sourced locally. However, in many emerging markets, the supply of high-quality and verified RECs is limited. This can lead to price volatility and procurement delays.
Singapore has introduced the SS 673 standard to bring more structure to its local REC market. It allows Singapore businesses to acquire regional RECs—those which weren’t produced in Singapore—to reduce their emissions.
Asiarecs helps businesses navigate the complexities of acquiring these regional RECs, allowing businesses to contribute to a greener environment despite the local REC shortage.
Partner with Asiarecs Today!
Companies that meet science-based targets enjoy greater investor confidence, improved supply chain resilience, and a stronger brand reputation.
Asiarecs is dedicated to helping businesses simplify this journey. We provide the platform and the expertise needed to secure green energy certificates across diverse markets. Our goal is to ensure your energy procurement supports your 2030 and 2050 targets.
Contact Asiarecs today to align your energy strategy with the latest in climate science.
Frequently Asked Questions
Can I use RECs to reduce my Scope 3 (Supply Chain) emissions?
Yes, as of 2026, the SBTi increasingly encourages companies to work with their suppliers to procure RECs. If your suppliers use renewable energy certificates to decarbonise their own electricity use, it directly reduces the “purchased goods and services” portion of your Scope 3 footprint.
What is the difference between "bundled" and "unbundled" RECs?
Bundled RECs are purchased directly alongside the physical electricity from a utility or via a Power Purchase Agreement (PPA). Unbundled RECs, which Asiarecs specialises in, allow you to purchase the green attributes separately from your physical power supply, providing the flexibility to go green even if your local utility does not offer a renewable energy option.
Is there an expiration date on RECs?
Yes. To maintain integrity, RECs typically have a vintage (the year the energy was generated). Under the GHG Protocol and SBTi, you should generally use RECs with a vintage that matches the reporting year of your electricity consumption to ensure your data is current and accurate.
How do RECs support the Additionality of renewable energy?
Additionality is the concept that your purchase directly leads to new renewable energy being built.
By purchasing RECs from new projects or those in emerging markets, you provide the financial incentive (the “green premium”) that makes renewable projects more viable than fossil fuel alternatives. This, in turn, accelerates grid decarbonisation.
