The question we hear most is not «what is an I-REC». It is this: regulation is landing on me, do I have to buy certificates?
The short answer is no. IFRS S2 and local rules such as Chile's NCG 519 ask you to measure and report Scope 2. They do not tell you which instrument to buy. The I-REC is a GHG Protocol tool for evidencing renewable grid electricity. A decision, not a tax.
Measuring is not the same as taking that number to zero. If your parent company, a bank, or a certification (SBTi, RE100) does ask for 100% renewable electricity, then the «how» matters. There are three paths. You can combine them. In all three, in Latin America, the evidence for the renewable claim is usually an I-REC redeemed in your name: retained if you self-consume, bundled if you have a PPA, unbundled if you buy only the attribute.
If the certificate itself is still fuzzy, start with the I-REC guide.
What Scope 2 is, briefly
The Greenhouse Gas Protocol splits emissions into three scopes. Scope 1 is what leaves sources you control. Scope 3 is the rest of the value chain. Scope 2 is the indirect piece from electricity, steam, heat, or cooling you purchase.
For electricity, the back-of-envelope math is simple: consumption (in MWh) times that grid's emission factor. The factor is, roughly, how much carbon sits in the mix of that power system.
Two readings of the same consumption
When contractual instruments exist in the market, the GHG Protocol asks for both:
- Location-based: the average of the grid where you are.
- Market-based: what you contracted, and the residual for what you did not cover.
Both go in the inventory. One shows the physical intensity of the grid. The other shows the company's purchasing choices. An I-REC properly redeemed in your name can lower the second. It does not switch off the first.
Reducing is not compensating
An I-REC attributes renewable electricity to your consumption. A carbon credit funds a project somewhere else and is booked separately. The offset does not move Scope 2. If it is sold to you as «offsetting the footprint» and you are talking about electricity, that is not it. We unpack the confusion in buying versus proving.
The three paths
1. On-site generation
You produce it and you consume it on the same site. It is the only path where origin is physical and exclusive. For the market-based method, the evidence is I-RECs retained in your name. If those certificates are sold to someone else, you lose the claim.
It does not cover what still comes in from the grid. When it fits: you have roof, land, or a plant of your own, and you can invest.
2. PPA
A medium- or long-term contract with a renewable generator. It gives you price certainty. It usually asks for volume, tenor, and negotiating muscle. Mixed grid electrons still arrive at your company. What lowers market-based Scope 2 are the I-RECs bundled to that generation, redeemed in your name. Without them, the PPA is not enough.
Two usual shapes. A physical PPA ties supply to a project (energy plus certificates, if you retain them). A virtual PPA is a price agreement; day-to-day electricity still comes from your usual supplier, and the bundled I-RECs travel in parallel for the report.
When it fits: free customer, high consumption, long horizon.
3. Unbundled I-REC
The same instrument, bought apart from the energy contract. It is the typical path for a regulated customer, for someone with many sites, for a short deadline, or for the remainder when on-site generation or a PPA does not cover 100%.
When it fits: you need evidence this year and there is no time (or no contract) to build the paths above.
A hierarchy, not a loose menu
A solid strategy usually goes in this order:
- Cut demand (efficiency).
- On-site generation, with the certificate retained.
- Renewable PPA, with the certificate bundled.
- Unbundled I-REC for the residual or for the regulated customer.
The certificate does not replace the steps above. It closes what efficiency, the roof, and the contract do not cover. If you already have panels or a PPA, you still need certificates for what still comes in from the grid.
What to have clear before a quote
- Scope 2 MWh to cover, by country or site if the inventory is split.
- Reporting period and vintage rule.
- Legal name of the reporting entity.
- Country of consumption (the certificate has to be compatible with that market).
- The date the evidence has to be ready.
Then you choose origin, transfer, redeem in your name, and keep the record with a cancellation ID, not only an intermediary PDF. The beneficiary has to be the same legal name as the inventory. Volume has to match consumption. Vintage has to match the year you report.
None of this is glamorous. It is the last mile, and it is where audits get stuck.
If your deadline is this year's report, tell us what you need. With volume, country, and date, a quote can be built. Without that, there is only a general conversation.
Sources
- GHG Protocol, Scope 2 Guidance: ghgprotocol.org/scope-2-guidance
- IFRS S2 (ISSB): ifrs.org
- Chile, NCG 519 (CMF): cmfchile.cl