What is an Environmental Credit?

Environmental credits form the basis of any carbon or cap and trade system, and can be bought and sold in the open market. Purchasing these credits can enable certain obligated entities to become compliant with environmental legislation. In the United States renewable fuel industry, the two most widely traded forms of environmental credits are Renewable Identification Numbers (RINs), which are on the federal level, and the Low Carbon Fuel Standard (LCFS) in California. Both programs have been designed to increase the renewable content of transportation fuels on a mandatory basis, but a voluntary markets for each are emerging as well. Renewable natural gas is one of several renewable fuel classes that can generate these credits.