To neutralize their carbon dioxide emissions, many companies buy certificates from clean power providers, called renewable energy credits, allowing them to claim they’re using carbon-free power.

A new analysis finds that when those credits — which have come under heavy scrutiny — are removed from companies’ carbon accounting, many businesses are no longer on track for meeting climate goals pegged to the Paris Agreement’s aims of limiting global warming to 34.7 or 35.6 degrees Fahrenheit.

For years, renewable energy credits have been an attractive way for companies to shrink their carbon footprints without necessarily contracting directly for clean power or installing solar farms and wind turbines. Instead, they buy credits and subtract an equivalent amount of fossil-fuel-powered electricity from their climate ledgers. The analysis suggests that because these credits are a lower-cost alternative to making emissions disappear, they encourage companies to set more ambitious targets.

The authors of the new study, published in the journal Nature Climate Change, only consider corporate emissions related to the purchase of electricity. When including energy credits in their carbon accounting, the 115 companies studied reduced their electricity-related pollution by 31% from 2015 to 2019. Without the credits, their emissions fell by only 10%.

“The widespread use of [renewable energy credits] raises doubt on companies’ apparent historic Paris-aligned emissions reductions, as it allows companies to report emission reductions that are not real,” according to the study.

Without a change to accounting methods, 42% of pledged electricity-related emission cuts will not reflect an actual reduction in atmospheric pollution, the authors write.


The Science Based Targets initiative is the gold standard for corporate climate goal-setting and can be helpful in identifying greenwashing. A partnership among several leading nonprofits, the project has helped 1,442 companies set up goals that are in line with scientists’ recommendations, and 1,111 companies have committed to reach net-zero emissions. Companies rely on it to craft their climate goals, and it’s the same initiative that’s admonished in the study’s title, “Renewable energy certificates threaten the integrity of corporate science-based targets.”

The Science Based Targets initiative did not respond to requests for comment.

The skewed emissions data, according to the study, mean that some companies that believed they were on track to meet the lower Paris Agreement goal of 34.7 degrees Fahrenheit of warming are “only barely” compliant with a 35.6-degree trajectory. Companies purportedly on track for a 35.6-degree world may not be aligned with Paris targets at all.

Of 77 companies that buy renewable energy credits and appear to be on track for goals consistent with 34.7 degrees, just 38 may be on target.

North American and European companies made up 88% of the total companies reviewed. Without the credits, the North American companies together appear to be on a trajectory consistent with a 35.6-degree world, and European companies overall are out of step with the Paris Agreement.

“If you take out the chunk of the reported emissions reductions based on these certificates that are likely not to actually have an impact on emissions — well, what is the actual emission reduction that was left? That was the study in a nutshell,” said Anders Bjørn, lead author and a postdoctoral fellow at Concordia University in Montreal.


Some big companies have said they will shift from buying energy credits to clean electricity that is confidently linked to lower emissions, like long-term clean power purchase agreements or renewable generators on site.

Michael Gillenwater, executive director of the Greenhouse Gas Management Institute, a nonprofit that works with carbon-accounting professionals, has written critically with one of the new study’s co-authors about the practice of using renewable energy credits to substitute for emission cuts.

“Some actions are completely without impact, but they’re all treated the same in carbon accounting,” Gillenwater said. “The rules let you say you’re not emitting, whether or not it’s true.”

The new paper’s authors make recommendations to fix the problem. The Science Based Targets initiative could change its guidance to exclude accounting that relies on energy credits. That might have the downside, though, of leaving valuable renewable power-purchase contracts unacknowledged. Or the initiative could amend its accounting to demand that companies claiming these credits demonstrate they will result in the emissions cuts, an approach favored by a U.K. Green Buildings Council method.