MEMO

To: Public
From: International REC Standard Foundation secretariat
Subject: Market Boundaries for use of I-RECs

Introduction
Most market players are aware that I-RECs can only be issued for output of production devices that are
located in an authorized issuance country and are registered with the local issuer. As showed by the
frequent incoming questions on market boundaries, it is not always clear among end-users where I-RECs
can be transferred to and from what location I-RECs can be redeemed.

This document aims to answer these questions through two different perspectives. A tracking system
perspective and a consumer claim standard perspective. In addition, this document touches upon the role
of interconnectivity as a factor for market boundaries and clarifies the use of I-RECs in relation with other
(national) systems.

Market Boundaries

1. Tracking System Perspective

From a tracking system perspective all EAC systems, including the I-REC Standard (but also EECS in
Europe or RECs in the US), generally allow for certificates to be redeemed in any location in or outside of
the electricity market in which the system operates. This means that I-RECs issued from a China device
can be redeemed for use in China, Japan, India, or even Brazil. The system is generally not seen as the
limiting factor on what is possible, rather they just allow market players and consumers to redeem
certificates where they see this as necessary or reliable. It is not the role of the system to place an
artificial market barrier.

2. Consumer Claim Standard Perspective

The fact that the system does not put an artificial market barrier on where I-RECs can be redeemed from
does not mean that I-RECs issued in China and redeemed in Brazil are automatically accepted by what we
call ‘consumer claim standards’ such as GHGP, CDP, RE100 and others. They may have different
regulations and feelings that limit these markets. These ‘consumer claim standards’ generally only allow
the redemption of EACs from the same country or same energy market. The same energy market is
generally defined as the same country with two exceptions
1. European Union is considered one energy market
2. United States and Canada is considered one energy market

In addition to consumer claim standards, the belief of end-users will also limit the pool of I-RECs that are
demanded by these individual consumers. Regardless of consumer claim standards not allowing the
redemption of Brazilian I-RECs for consumption in China, many end-users will also have the belief that
this is not a good practice.

Market Boundary Page 1/2

Role of interconnection
The International REC Standard Foundation shares the view of RECS International’s ‘Guidance for market
participants’ regarding market boundaries and interconnectivity. This means that it is our view that the
lack of interconnectivity is not a legitimate factor to restrict consumer claims. Instead, the restriction
should be placed on legal boundaries.
The limitations of using interconnectivity as market boundary can be best explained through the use of an
example. Would a claim on one Indonesian island with an I-REC from another Indonesian island not be
valid because it is not interconnected? They are in the same legal market, have the same grid operator
and follow the same legislation. What if there was interconnection but down for a few months of any
specific year? What if the interconnection is so small it could never supply the client even with full
operation only for them? All EAC systems are based upon a book-and-claim system in which the transfer
and redemption of certificates is independent from the electricity it is based on. Limiting the use of EACs
around the world by focusing on interconnectivity would put too much restriction on the use of these
systems and therefore put a restriction on the possibility for end-users to purchase renewables.

As the definition of market boundaries is broad, others might have different opinions on the function of
interconnectivity but this statement simply sets out the view of the International REC Standard
Foundation.

Interaction I-RECs with other (national) systems

The use of I-RECs is restricted to making voluntary disclosure claims meaning that I-RECs cannot replace
other (national) certificates that are used to meet national targets unless authorities specifically recognize
I-RECs as an instrument to comply to their targets.

Discussion on the Code Change Proposal for offset rights retainment Page 2/2 February 2020