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Renewable energy credits (RECs) vs renewable energy tax credits
"Renewable energy credit" can mean two very different things. A REC is an environmental certificate. A renewable energy tax credit, such as the §48E investment credit, reduces federal income tax. Only one of them lowers a tax bill.
Comparison
| Renewable energy certificate (REC) | Renewable energy tax credit | |
|---|---|---|
| What it is | A market instrument representing the environmental attributes of one megawatt-hour of renewable electricity (EPA) | A credit against federal income tax created by the Internal Revenue Code |
| Who regulates it | Tracking systems and state or voluntary programs | The IRS and Treasury |
| Why a company buys it | To substantiate renewable electricity use or sustainability claims | To reduce federal tax owed |
| Does it reduce taxes? | No | Yes, within limits such as the general business credit cap |
| Examples | Solar RECs, wind RECs | §48E, §45Y, §45X |
The same solar project can create both: it can sell RECs for its environmental attributes and, separately, claim or sell a tax credit. They are different assets with different buyers and different rules.
What EPA says a REC is
The EPA describes a REC as a market-based instrument that represents the property rights to the environmental, social and other non-power attributes of renewable electricity generation, issued when one megawatt-hour of electricity is generated and delivered to the grid from a renewable resource (EPA).
If your goal is lower federal tax
Buying RECs will not reduce a federal tax bill. A company that wants a tax credit it can purchase should look at credits on the IRS transferable list (see which credits are transferable). For most buyers the starting point is §48E, whose rules, pricing and recapture risk are covered in our guides. See also renewable energy tax credits.
Educational information only, not tax, legal or investment advice, and no outcome is promised. Rules and figures were checked against the cited sources on October 31, 2026; they change, so confirm with your CPA and counsel before acting. Veritas does not offer or solicit investments. See our disclaimer.
Frequently asked questions
Is a REC the same as a tax credit?
No. A REC is an environmental certificate for one MWh of renewable electricity. A tax credit reduces federal income tax.
Does buying RECs lower my taxes?
No. RECs support sustainability and renewable-use claims. They are not a credit against tax.
Can a project sell both RECs and tax credits?
Generally a project can earn RECs from its output and separately claim or transfer a tax credit. They are different assets governed by different rules.
Which renewable energy tax credit can a business buy?
Credits on the IRS transferable list can be bought under §6418, including the §48E clean electricity investment credit. Confirm eligibility and limits with your CPA.