The Role of REC Trading in Asia-Pacific’s Energy Transition (VIDEO)

As global companies look to decarbonize their supply chains, renewable energy certificates (RECs) are becoming a vital tool, especially in Asia-Pacific (APAC).

This video explores how RECs work, including I-RECs, TIGRs, and GECs, and outlines the growing demand for renewable energy sourcing in APAC. Learn about the challenges businesses face—from fragmented markets and foreign exchange exposure to knowledge gaps—and discover how renewable energy certificates offer a credible path to decarbonization, recognized by leading standards like RE100, SBTi, and the Greenhouse Gas Protocol.

What are renewable energy certificates (RECs)?

Renewable energy certificates, otherwise known as RECs, are digital certificates that prove that 1 megawatt-hour of electricity is generated from a renewable energy source.

These sources can come from solar, wind, or geothermal projects. More importantly, these certificates help companies make sustainability claims and help them meet their renewable energy goals.

How does REC trading work in Asia-Pacific?

In Asia-Pacific, RECs are mostly traded over-the-counter (OTC), meaning that you have to reach out to a broker or an adviser like 3Degrees to get a pricing quote.

What’s interesting about APAC is that we are seeing a rising demand for these certificates as more companies get on board with their sustainability goals.

What are the main types of RECs in APAC?

In terms of types of RECs, we see two main buckets. One is the internationally traded REC, which can come in the form of an I-REC or a TIGR (Tradable Instruments for Global Renewables), and these are mostly traded in Southeast Asia or even off Asia.

At the same time, we are starting to see new markets or new emerging national markets in China and India. In the case of China, with GECs (Green Electricity Certificates). These are more domestic certificates, and they are very specific to their market.

Why is REC trading necessary for the energy transition in APAC?

As corporates start to map out their global emissions footprint, they are recognizing that APAC, being the large supply chain hub that it is, is a huge lever in opportunity for them to decarbonize.

In the case of RECs, it is one of the few accepted and credible ways for companies to take action, and it is accepted by leading standards such as SBTi, RE100, and the Greenhouse Gas (GHG) Protocol.

What challenges exist in the APAC market?

We are seeing some challenges in the APAC market, namely knowledge gaps, very distinct market environments, and macro challenges due to exchange exposure.

Knowledge gaps

On the first one about knowledge gaps, what is interesting is that many of these companies in APAC do not have a dedicated sustainability team. Therefore, there is no champion for these sustainability initiatives.

Distinct market environments

Secondly, I think there is also recognition that APAC is a very distinct market. It is not the same as in the U.S. or Europe where it is a single market with harmonized regulatory standards. In APAC, these are discreet countries, so there is a need to match both the local and international standards.

Macro challenges

What is also interesting is that companies in APAC are exposed to foreign exchange rates. These certificates (RECs) are traded on a U.S. dollar basis, but many of these (APAC) countries have their own domestic currency. That is also causing a lot of companies to pull back to get more certainty of the market.

What are the big opportunities for Asian corporates?

Investing in renewable energy

Within those challenges, we see two large opportunities for Asian corporates. The first one is that investing in renewable energy demonstrates climate leadership which positively impacts their bottom line.

Standardization of the REC market

And the second opportunity that we see is the standardization of the REC market in APAC. This would enable a smoother trading process, which would allow corporates to credibly decarbonize their supply chains.