Renewable Energy Certificates help stimulate clean energy production and cut emissions contributing to global warming. The clean power generated adds to the National Electricity Grid, displacing electricity generated from fossil fuels.
To make it a little more confusing, Renewable Energy Certificates or RECs are also often referred to as a Carbon Credit scheme, although it is generally at a large industry scale, which is in contrast to personal Carbon Credits. Basically, RECs are an innovative way to stimulate the growth of renewable energies.
Nuclear and fossil fuels are cheaper than most renewable sources because these power generators are subsidised and the full cost of power is not reflected in the price charged. This is due in part to subsidies by governments and partially to market structures that do not fully capture all social and environmental costs associated with conventional electricity plants. What is generally not in the price equation are things such as; the costs of air pollution, price tags to maintain military campaigns in oil-rich parts of the world, disposal costs for nuclear waste, health impacts of coal/nuclear power, and consequences of global warming.
The wholesale price for electricity is generally determined by conventional electricity sources and is often less than the cost of producing electricity through cleaner renewable methods. Carbon Credits, Green Tags or RECs represents an additional payment for producing power from renewable resources. This allows the producer to create and sell electricity at the local market price and enables cleaner renewable energy sources to come online.
RECs are a tradable form of electronic currency and represent the environmental attributes of the power produced from renewable energy projects and are sold separate from commodity electricity. Although they differ between countries, under most programs, one REC would be equivalent to the environmental attributes of one MWh (Mega Watt hour) of electricity from a renewable generation source.