Oftentimes offsets are used to reduce the cost-differential between renewable and conventional energy production (i.e. to make the projects economically feasible. Other projects take place in developing countries, such as training local communities to produce biodiesel from jatropha oil.

Renewable energy projects very often make use of Renewable Energy Credits (RECs). RECs represent the creation of 1 megawatt hour of electricity from renewable energy sources, and can be used to comply with regulations (such as renewable portfolio standards) or sold through voluntary markets. When sold as offsets, RECs are typically multiplied by a certain factor to approximate avoided emissions (i.e. the emissions that would have been created by generating electricity through conventional means).

On the one hand, REC markets (both voluntary and mandatory) may promote the growth of renewable energy sources. On the other hand, the sale of RECs as offsets is complicated and potentially problematic. At the most basic level, the RECs need not meet the same quality standards that offsets are required to comply with. In most cases, the additionality of REC projects is difficult to demonstrate.

In some cases, however, RECs may be a reasonable alternative to conventional offsets. A number of companies have stated that their RECs have to comply with the same additionality criteria as carbon offsets, and Green-e certified RECs cannot be counted towards Renewable Portfolio Standards or any other legal requirements.

Emissions trading markets, such as the Chicago Climate Exchange, allow companies that have reduced emissions below a certain target to sell their remaining allowances (the amount they have reduced beyond the target) to other companies which did not reach the target. By providing a monetary incentive for emission reductions, it is hoped that companies will be encouraged to reduce emissions beyond mere compliance. Systems like the European Union Emission Trading Scheme (EU ETS) and the Kyoto Protocol’s Clean Development Mechanism (CDM) operate in a similar fashion, albeit at an inter-governmental rather than inter-company level.

One common hurdle to implementing renewable energy projects is their initial costs. While they may offer high rates of return on investment, the up-front capital requirements are sometimes an insurmountable hurdle for developers. Geographic, social and political factors can also at times pose challenges to projects.