What you need to know about the rise of I-RECs in Brazil

Last year, International Renewable Energy Certificate (I-REC) sales in Brazil more than doubled to 9.5 million, up from 4 million in 2020. Atlas Renewable Energy takes a look at the trend, and explains what companies need to know before using I-RECs to meet their sustainability objectives. 

“We’re receiving an increasing number of enquiries from international and national companies with operations in Brazil about I-RECs,” says Felipe Maldonado, commercial analyst at Atlas Renewable Energy, which holds one of the largest solar energy portfolios in Brazil, with almost 1.6 GW of contracted projects. It recently became the first solar developer in the country to offer Brazilian RECs that foster all of the 17 United Nations’ Sustainable Development Goals.

“These enquiries fall into two main groups: companies that already understand I-RECs and want to purchase them, and those who are looking for guidance,” says Maldonado. He adds that companies are particularly interested in understanding how I-RECs can help them achieve their sustainability goals, and how they differ from other instruments such as carbon credits.  

I-RECs are just part of the solution

Although it may be tempting for executives to think that simply purchasing I-RECs is enough to become “green”, this is far from the case. Numerous regulatory bodies around the world, from the Securities Exchange Commission in the United States to the Monetary Authority of Singapore, are cracking down on so-called corporate greenwashing, enforcing disclosure standards on environmental, social and governance (ESG) reports as vigorously as they uphold rules for other corporate reporting. There are no shortcuts here, but I-RECs should – and can – be used as part of a wider integrated climate action strategy. 

“The first step is to carry out a carbon inventory in order to find out the level of CO2 emissions your company is responsible for,” says Maldonado. Armed with this information, companies can then take steps to reduce their carbon footprint, through changes in production, transportation, and manufacturing practices, for example. For large electricity users, making the switch to renewables through a partnership with Atlas is an obvious way of slashing emissions. “Where I-RECs – and other instruments such as carbon credits – come in is for those emissions that are impossible to reduce,” explains Maldonado. 

Globally, the I-REC market is still at a relatively nascent stage, but demand is increasing as more and more corporations commit to 100% renewable energy consumption and climate disclosure objectives as laid out by the CDP and RE100. 

“Although it’s not yet mandatory for companies to neutralise their carbon footprint, many business leaders are taking proactive steps to align their environmental strategy with global best practice,” says Maldonado, adding that growing reputational risk and pressure from customers are driving an increasing number of companies to look at ways of slashing their CO2 emissions. “Our approach at Atlas is to partner with those companies to help them leverage I-RECs to reach their goals.” 

Avoiding greenwashing

These goals include meeting compliance with external and internal renewable energy targets, as well as giving their environmental claims real substance – helping them to avoid greenwashing. “One I-REC avoids the emissions created by the use of 1 MWh,” says Maldonado. In 2021, every 1MWh of energy consumed in Brazil created 120kg of carbon emissions – up from around 50 kg in 2020. This huge increase was caused by a rise in thermoelectric generation as a result of the worst drought in almost a century, which saw the country’s hydroelectric capacity fall as dams dried up. 

“In a country like Brazil where the effects of climate change are already so visible, companies that are serious about tackling their emissions can make an important statement through the use of I-RECs, which enable them to make certain claims about their climate impact,” says Maldonado, adding that several companies seek to do this in order to strengthen their brand value and gain a competitive edge in the future low-carbon economy. “However, it’s vital to do this in the right way. Before making any claims, they need to bring in a consultancy to verify that they are using the appropriate number of I-RECs to compensate for their emissions. By doing this, the company – and its customers – can ensure that they are in line with the Scope 2 guidance of the GHG Protocol.” 

Gaining internal buy-in

Given the current global economic and geopolitical backdrop, convincing already overburdened business units to invest in I-RECs or carry out voluntary climate action activity is often a challenge for sustainability officers within large companies. “Overwhelmingly, ESG teams face challenges in developing a roadmap for achieving net-zero,” says Maldonado. “Management wants to report their carbon emissions and reduce their footprints, and they want to demonstrate credibility to investors, customers, civil society, and other stakeholders, but finding a way to do this while also leading the business through challenging times often represents a barrier.”

However, companies don’t need to go it alone. Numerous consultancy firms can help them develop an I-REC strategy that best matches their goals.

“For companies that don’t have in-house expertise on GHG accounting, the liaison tends to be either a broker or a consulting company. These intermediaries ensure their clients buy I-RECs to help offset their emissions properly, taking the uncertainty out of the process,” says Maldonado. “As internal conversations evolve and executives within companies become more familiar with the finer details of decarbonization, they tend to reach out to us directly via their in-house ESG or sustainability teams.”

Contributing to a more sustainable future for Brazil

As more and more companies with operations in Brazil look for tangible ways to deliver on their renewable energy promises, I-RECs are demonstrating their worth as the most credible way to account, track and assign ownership of renewable energy, as well as encourage the generation of more clean electricity by providing a demand signal to the market.

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