Glossary

Renewables & Sustainability Glossary

Additionality:
In the context of carbon offsets, renewable energy projects, and sustainability claims, additionality means that a project or action results in environmental benefits that would not have happened without the support (funding, purchasing, or investment) of the buyer.

• Key Idea: If a renewable energy project or carbon reduction effort would have occurred anyway (for example, because it was already profitable without outside help), it does not meet the standard of additionality.
  
  
• In Carbon Offsets: A carbon offset must represent a real, measurable, and additional reduction in greenhouse gas emissions. Without this principle, purchasing offsets wouldn't actually change the overall amount of emissions in the world.
  
  
• In Renewable Energy: Purchasing RECs, PPAs, or VPPAs that support new renewable projects (vs. existing ones) is often considered a stronger climate action because it ensures additional renewable capacity is being built.
  
  

Why It Matters:

• It ensures that investments genuinely drive new climate-positive outcomes, rather than just shifting ownership of existing benefits.
  
  
• Standards and certifications (like Verra’s VCS, Gold Standard, or CORSIA-eligible credits) require proof of additionality for projects to be validated.
  
  

Example:

• Additional: Funding a new wind farm that wouldn’t be built without your financial support.
  
  
• Not Additional: Buying credits from an existing hydro dam that has been running profitably for 20 years.

Renewable Energy Credit (REC):
Proof that 1 megawatt-hour (MWh) of renewable electricity has been generated and added to the grid. RECs are tradable commodities that allow the environmental benefits of green power to be separated from the physical electricity.

Carbon Offset:
A verified reduction of greenhouse gas emissions used to counterbalance emissions produced elsewhere.

PJM (Pennsylvania-New Jersey-Maryland Interconnection):
A regional transmission organization (RTO) that coordinates the movement of wholesale electricity in parts of 13 states and Washington, D.C.

NEPOOL (New England Power Pool):
The organization that coordinates the wholesale electricity market and transmission grid for New England, operating within the ISO New England region.

WECC (Western Electricity Coordinating Council):
A regional entity responsible for coordinating and promoting electric system reliability in the western part of North America.

WREGIS (Western Renewable Energy Generation Information System):
An independent, renewable energy tracking system for the WECC region, issuing and managing RECs for renewable generation.

M-RETS (Midwest Renewable Energy Tracking System):
An independent platform that tracks renewable energy generation, issues RECs, and ensures that RECs are properly retired in the Midwest and parts of Canada.

NAR (North American Renewables Registry):
A tracking system for issuing, transferring, and retiring renewable energy certificates across North America outside of other established regional systems.

IREC (Interstate Renewable Energy Council):
A nonprofit organization focused on accelerating the adoption of clean energy and energy efficiency through education, policy development, and workforce training.

Tracking System:
An electronic platform (like M-RETS, WREGIS, or PJM-GATS) that issues, manages, and tracks ownership of RECs, carbon offsets, or other environmental attributes to ensure no double-counting.

Retirement (of RECs):
The act of permanently removing a REC from circulation, signifying that the environmental benefits have been claimed and can no longer be traded or sold.

Transfer (of RECs):
The movement of ownership of a REC from one party to another within a tracking system, often before retirement.

Meter Reads:
Actual measured energy production data recorded from a renewable energy generator’s meter, which is used to issue RECs accurately.

Power Purchase Agreement (PPA):
A long-term contract to buy electricity directly from a renewable energy project at a predetermined price.

Virtual Power Purchase Agreement (VPPA):
A financial contract for differences where no physical power is delivered, but the buyer supports a renewable project financially and receives RECs.

Greenhouse Gas (GHG) Emissions:
Emissions of gases like carbon dioxide (CO₂) and methane (CH₄) that trap heat in the atmosphere.

Scope 1, 2, and 3 Emissions:
Categories that classify a company's direct and indirect GHG emissions.

Net-Zero:
A state where a company, city, or individual balances emitted greenhouse gases with an equivalent amount of removal or offset.

Carbon Neutral:
When carbon emissions are balanced by carbon offsets or removals, resulting in a "neutral" carbon footprint.

Sustainability:
Meeting the needs of the present without compromising the future, encompassing environmental, social, and economic practices.

Environmental, Social, and Governance (ESG):
Standards for corporate behavior that investors increasingly consider when evaluating risk and growth potential.

Circular Economy:
An economic model focused on reusing, recycling, and regenerating products and materials, minimizing waste.

Greenwashing:
The practice of making misleading claims about the environmental benefits of a product, service, or company practices.

LEED Certification (Leadership in Energy and Environmental Design):
A certification for buildings that are environmentally responsible and resource-efficient.

RE100:
A global corporate initiative uniting companies committed to 100% renewable electricity by a target year, often 2030 or 2050.

Energy Attribute Certificate (EAC):
A generic term referring to any certificate (REC, Guarantee of Origin, etc.) that represents proof of renewable energy generation.

Guarantee of Origin (GO):
The European counterpart to RECs, verifying that one MWh of electricity was produced from renewable sources.

Additionality:
A concept where renewable energy projects funded (or purchased from) would not have occurred without the buyer’s involvement, creating "additional" environmental benefit.

Bundled vs Unbundled RECs:

• Bundled: The REC and the electricity are sold together.
  
  
• Unbundled: The REC is sold separately from the physical electricity.

Guarantee of Origin (GO):
A Guarantee of Origin (GO) is a voluntary, standardized certificate used across the European Union (EU) and some neighboring countries. It certifies that 1 megawatt-hour (MWh) of electricity was produced from renewable energy sources like wind, solar, hydro, or biomass.

• Purpose: It separates the environmental attributes of renewable electricity from the physical electricity.
  
  
• Use: Companies or individuals can purchase GOs to verify their renewable energy use, even if the physical electricity they consume comes from the grid (which is a mix of sources).
  
  
• Management: GOs are issued, traded, and cancelled via national registries under the governance of the Association of Issuing Bodies (AIB) and follow the European Energy Certificate System (EECS) rules.
  
  
• Important Detail: GOs are often critical for corporate sustainability reporting and compliance with initiatives like RE100 in Europe.
  
  
• Comparison: GOs are the European counterpart to U.S. Renewable Energy Credits (RECs).
  
  

CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation):
CORSIA is an international program developed by the International Civil Aviation Organization (ICAO) to address the growth of carbon emissions from international air travel.

• Goal: To stabilize aviation emissions at 2020 levels.
  
  
• Mechanism: Airlines must purchase carbon offsets or use lower-carbon fuels to "neutralize" any emissions growth above 2020 levels.
  
  
• Phases:
  
  
  • Pilot Phase (2021-2023): Voluntary participation.
    
    
  • First Phase (2024-2026): Still mostly voluntary, expanding.
    
    
  • Second Phase (2027 onward): Mandatory for most international flights between participating countries.
    
    
• Key Point: CORSIA emphasizes the use of credible carbon offsets verified by approved international standards (like Gold Standard, Verra, etc.).

CSRD (Corporate Sustainability Reporting Directive):
CSRD is a major piece of legislation passed by the European Union to overhaul and significantly expand corporate sustainability reporting.

• Who It Applies To:
  
  
  • Large companies operating in the EU (listed and non-listed).
    
    
  • Non-EU companies with significant business activities in the EU (revenue threshold).
    
    
• Key Requirements:
  
  
  • Disclose not just environmental impact but also social and governance issues (full ESG scope).
    
    
  • Follow mandatory European Sustainability Reporting Standards (ESRS).
    
    
  • Audit and assure sustainability data (similar to financial audits).
    
    
• Timeline:
  
  
  • Starts phasing in from 2024 for large listed companies; 2025-2026 for other categories.
    
    
• Impact:
  
  
  • Companies will need to report detailed climate risks, carbon targets, supply chain impacts, biodiversity actions, human rights practices, etc.
    
    
• Important: CSRD goes far beyond previous rules (like the Non-Financial Reporting Directive - NFRD) and will heavily influence global sustainability standards.
  
  

SFDR (Sustainable Finance Disclosure Regulation):
SFDR is an EU regulation requiring financial market participants (like investment managers and financial advisers) to disclose how they consider sustainability risks in their investment decision-making and financial products.

• Goal: Increase transparency around sustainable investment products and prevent greenwashing.
  
  
• Applies To: Investment funds, insurance-based investment products, pension funds, and asset managers operating in or marketing into the EU.
  
  
• Key Concepts:
  
  
  • Disclosure of Principal Adverse Impacts (PAIs) — how investments negatively affect ESG factors.
    
    
  • Classification of investment products into three categories:
    
    
    • Article 6: No sustainability objective.
      
      
    • Article 8: Products promoting environmental/social characteristics.
      
      
    • Article 9: Products with sustainable investment as a core objective.
      
      
• Timeline: Phased in from 2021, with additional detailed reporting requirements (Level 2 rules) starting in 2023.
  
  

TCFD (Task Force on Climate-related Financial Disclosures):
TCFD was created by the Financial Stability Board (FSB) to develop a standardized framework for companies to disclose climate-related financial risks and opportunities.

• Focus Areas:
  
  
  • Governance: How climate risks are managed at leadership level.
    
    
  • Strategy: Impact of climate risks and opportunities on business models and strategies.
    
    
  • Risk Management: Processes for identifying, assessing, and managing climate risks.
    
    
  • Metrics & Targets: Specific measurements (like GHG emissions) and climate goals.
    
    
• Voluntary but Influential:
  
  
  • Many regulators (including in the EU, UK, Japan, U.S.) are moving toward making TCFD-aligned reporting mandatory.
    
    
• Why It Matters: TCFD helps investors understand how exposed companies are to climate risks (like carbon pricing or extreme weather events).
  
  

GRI Standards (Global Reporting Initiative):
GRI Standards are the world’s most widely used framework for sustainability reporting — across environmental, social, and governance topics.

• Structure: Organized into Universal Standards, Sector Standards, and Topic Standards.
  
  
• Purpose: Help companies report their impacts on the economy, environment, and society, both positive and negative.
  
  
• Materiality Focus: Traditional GRI focuses on impacts on the world, not just on the company's financial performance (unlike TCFD).
  
  
• Global Influence: Used by thousands of organizations, and often referenced in alignment with EU regulations like CSRD.
  
  

Double Materiality:
Double Materiality is the concept that companies must disclose information that is material in two ways:

• Financial Materiality:
  
  
  • How sustainability issues (like climate change) affect the company’s financial performance.
    
    
• Impact Materiality:
  
  
  • How the company's activities impact the environment and society.
    
    
• Why It’s Important:
  
  
  • CSRD (EU) fully embraces Double Materiality.
    
    
  • U.S. and IFRS sustainability frameworks traditionally focused only on financial materiality, but the landscape is shifting toward double materiality globally.
    
    
• In Practice: Companies need to show both how climate change could hurt their business and how their operations affect people and the planet.

CSRD = Requires Double Materiality

SFDR = Applies to Financial Products

TCFD = Financial Risk from Climate

GRI = Reporting of Broader Impacts