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Environmental Attribute Credits Effective in Supporting Renewable Transition, Study Finds

Environmental attribute credits are effective at supporting investment in and the development of renewable energy resources, according to a paper by researchers in the Clean Energy Institute at the University of California, Irvine.

The white paper, Environmental Attribute Credits: Analysis of Program Design Features and Impacts, assessed seven program design features related to the generation and use of environmental attribute credits, their impact on cost and on the attainment of environmental goals.

The analysis looked at the available evidence on requirements for use of tradable credits, time matching, additionality, geographic boundaries, verification and tracking, preference for nascent technologies and methods to ensure credit value certainty.

“There is evidence and rationale to support the range of positions being put forward on these issues,” Jeffrey Reed, lead author of the report and chief scientist for renewable fuels and energy storage with University of California, Irvine’s Clean Energy Institute, said in a statement. “Notwithstanding program differences, there is robust evidence that the use of EACs supports market development and facilitates investment in environmentally preferred resources.”

While the authors noted the wide variety of available environmental attribute credits, including credits for renewable natural gas and hydrogen, renewable electricity certificates, renewable thermal credits, renewable thermal certificates, low carbon fuel standard credits, and renewable identification numbers, the primary focus of the paper was on renewable energy certificates because of the ongoing debates in various policy venues regarding the appropriateness of and conditions for the use of those instruments.

In theory, the authors said, the use of environmental attribute credits leads to the least overall cost for meeting environmental goals by stimulating the development and operation of least-cost, highest-benefit projects. However, when clean energy is more costly than fossil energy, and the cost differential exceeds customers’ willingness to pay, there is a need for regulatory or statutory mechanisms to promote adoption through mandates or incentives, “EACs can be an important tool to facilitate both mandates and incentives,” the authors said.

The paper also noted a key balance regarding the stringency of EAC requirements that needs to be achieved to ensure the success of such programs. “There is a natural tension between the producers of clean power or fuels under such programs who desire simplicity and broad eligibility, and program designers concerned with ensuring that the desired environmental benefits underpinning a given program are achieved,” the authors wrote.

Greater stringency, they noted, “is generally argued as ensuring higher environmental integrity, while less stringency is argued as more supportive of investment in and deployment of environmentally-preferred resources.”

“We hope this white paper will contribute to a fact-based dialogue that helps to find the right balance points in program design features, maximizing clean technology deployment at least cost, while ensuring that environmental goals are achieved,” Reed said.