Environmental Attribute Certificates vs Carbon Credits: how do they compare?

Environmental Attribute Certificates (EACs) and Carbon Credits (CCs) – two distinct  product categories –

are often conflated.

Both are tradable digital assets that are used to manage an entity’s environmental impact, and require

high-quality data to create their value.

However, their design, impact on an entity’s emissions, and use cases are markedly different.

Inside vs outside supply chain 

The most fundamental difference between EACs and CCs is that the former certifies environmental performance within the using entity’s supply chain, whereas the latter represents an action taken outside the using entity’s supply chain.

By purchasing an EAC, an entity can therefore directly improve the environmental performance of a good that it uses or sells.

Carbon credits, on the other hand, do not directly change the environmental performance of a good. Rather, they compensate for the impact or its creation or use by undertaking an emission-reduction or removal activity not directly related to the using entity’s activities.

Physical vs digital delivery 

Both EACs and CCs are tradable digital assets that can be transacted independently of physical products or commodities. 

As both products are delivered digitally, the environmental claims they convey can be transferred independent of – often very significant – physical constraints.  

Units: a simple way to differentiate 

A simple way to differentiate between EACs and CCs is the unit they’re denominated in. Whilst CC’s always represent one metric tonne of CO₂ removed from or prevented from entering the atmosphere, an EAC is denominated in the unit of the underlying good: 

• For electricity-based EACs (Renewable Energy Certificates), this is MWh; 

• For concrete-based EACs, this is per-tonne of concrete. 

Impact on environmental accounting 

Due to their different structures, EACs and CCs are treated differently within emission accounting frameworks: 

• Allocational/Attributional accounting answers, “What is the emission intensity of the good I used or sold?” and is the realm of EACs; it affects the product’s lifecycle analysis and, where permitted, market-based inventory figures. 

• Consequential accounting answers, “What change did my purchase cause beyond my boundary?” and is the realm of carbon credits; it supports compensation/offset claims but does not alter the underlying product footprint. 

A symbiotic relationship 

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. 

The table below provides a high-level overview of how the two products compare: 

The value of data 

An absence of data leaves existing carbon footprinting practices relying heavily on industry averages. Companies following these practices remain in the dark regarding their true emissions footprint, and the information created is not decision-useful.  

EACs coupled with CCs, when based on high quality data, provide companies with digital certainty regarding their environmental performance in place of black-box estimations.  

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