Environmental Attribute Certificates: An Overview

Environmental Attribute Certificates (EACs) transform in-supply-chain emission reductions into tradable assets by decoupling environmental attributes from the physical flows of products or commodities.

This decoupling broadens the demand pool for low-emission solutions beyond direct supply chain counterparts, enabling the financing of such solutions at scale. 

In this piece, we will unpack the fundamental components of EACs, explain how they differ from carbon credits, and explore their value in real-world scenarios.

Environmental Attribute Certificate (EAC) Basics

Every product or commodity has an associated environmental impact.

To deliver a brick to a building site, emissions – be it the release of carbon dioxide (CO₂), nitrous oxides, or pollutants into aquifers – are released at every stage: from raw material extraction through processing, firing, and end-product transportation.

When low-emission technologies or procedures are used, the record of this creation process is valuable as it certifies the environmental performance for the end user.

EACs enable this value to be monetized. By transforming low-emission attributes of production into tradable digital assets, entities can finance in-supply-chain emission reductions independent of physical constraints.

Once an EAC is sold, the associated product can no longer be marketed as low-emission, thereby avoiding double-counting.

EACs vs Carbon Credits

EACs record direct, in-supply-chain emission reductions, certifying the environmental performance of a product or commodity. This enables entities to directly reduce their emissions.

Carbon credits, by contrast, exist outside an entity’s supply chain, acting as compensation mechanisms. They do not enable a company to directly reduce their emissions.

The two groups of environmental instruments are also denominated in different units. Each EAC represents the environmental attributes of one unit of the underlying product or commodity (e.g. 1MW of Power or 1 tonne of Concrete), whereas carbon credits each represent one tonne of CO₂ removed from or prevented from entering the atmosphere.

When created using high-quality data, both are effective tools that function symbiotically to manage environmental performance. As lifecycle emissions rarely (if ever) achieve zero emissions, EACs will always record a level of emissions for which carbon credits can be used to compensate.

Decoupling Emissions

The deployment of emission reduction technologies often requires significant upfront investment and disruption to existing supply chains, yet the environmental benefits these projects yield are challenging to monetize.

The decoupling of environmental attributes and physical flows supports scaling of low-emission solutions via:

• Access to Capital: EACs create a larger pool of capital, encouraging wider funding for low-emission technologies.

• Operational Ease: Companies can lower emissions without costly, intrusive or disruptive supply chain changes.

• Reduced Financial Risk: Shared investment reduces upfront costs and mitigates financial risk. This opens new channels of emission reduction potential for companies unable to fund the decarbonization of their value chain.

Real World Applications

To-date, the most common type of EAC is a Renewable Energy Certificate, or REC. RECs separate the renewable energy attribute from the physical electricity flow: when an entity purchases a renewable energy tariff, the flow of electrons does not change; rather, the renewable energy attribute is transferred through purchase of a REC.

RECs are categorized as Energy Attribute Certificates, a subcategory of Environmental Attribute Certificates.

Outside RECs, EACs are an immature but growing market. EACs can apply to any product or commodity – for example, concrete. Concrete is notoriously challenging to decarbonize, and the deployment of low-emission production technologies requires significant upfront investment.

A concrete EAC would enable concrete producers to more readily monetize their low-emission technology investment, as the emission reduction claim can be transferred independent of – very significant – physical constraints.

EAC Heterogeneity

Historically, EACs have varied in precision and data quality.

Some EACs rely on annual reporting and broad estimates, offering only a high-level view of their impact.

Others use granular, technology-driven measurements for real-time, high-precision tracking.

The credibility, market value, and scalability of EACs depends on the quality and frequency of their underlying data. As EAC markets mature, high-quality data will ensure that EACs are trusted and tradable at scale.

For further information about EACs or greater insight into environmental markets, please contact us or subscribe to our newsletter!