As companies across North America advance their decarbonization strategies, one issue has become increasingly clear. Electricity is only part of the problem. For many organizations, the combustion of fossil natural gas for heating, cooling, and industrial processes represents one of the largest and most persistent contributors to their emissions footprint. Addressing these direct, on-site emissions is essential for achieving meaningful climate progress, yet the tools available to companies remain limited. Renewable Thermal Certificates, often referred to as RTCs, have emerged as the primary market-based solution for reducing Scope 1 emissions. However, the RTC market operates under structural constraints and competing policy pressures that make it far more complex than its electricity-focused counterpart.

RTCs represent the environmental attributes associated with renewable natural gas. When biogas from sources such as landfills, agricultural operations, or wastewater treatment facilities is upgraded and injected into a pipeline, the renewable attribute is separated from the physical gas and tracked as a certificate. Companies that retire RTCs equivalent to their thermal consumption gain the right to claim a reduction in their direct emissions. This mechanism provides an immediate pathway for companies seeking to decarbonize operations that otherwise rely heavily on gas-fired equipment.

The appeal is clear. Unlike major equipment retrofits or electrification, RTC procurement requires no capital expenditure, no downtime, and no modification to existing systems. It is scalable, verifiable, and aligned with recognized reporting frameworks. Yet the market dynamics that support RTCs differ significantly from those governing renewable electricity certificates. The most important distinction lies in the overwhelming influence of regulatory compliance markets in the United States.

Federal and state transportation fuel standards, particularly the Renewable Fuel Standard and the Low Carbon Fuel Standard, have created powerful financial incentives for producers of renewable natural gas. Producers can earn substantial credits by supplying RNG to the transportation sector, often generating revenue levels that far exceed what voluntary thermal buyers can reasonably match. As a result, most RNG attributes flow into these compliance programs, leaving a much smaller portion available for voluntary corporate decarbonization. This competition is the root cause of persistent scarcity and price volatility in the RTC market.

This structural scarcity is unlikely to disappear soon. Transportation programs continue to tighten their carbon intensity targets, increasing demand for low carbon fuels. At the same time, RNG production capacity is growing, but not at a pace sufficient to offset the dominance of compliance markets. Feedstock availability, project development timelines, and capital requirements place natural limits on supply. These constraints force voluntary buyers into a competitive environment where pricing is heavily influenced by policy decisions rather than traditional supply and demand fundamentals.

The result is a market characterized by volatility and uncertainty. Fluctuations in federal or state credit prices can rapidly influence RTC pricing. Policy reforms can alter the economics of RNG development. Shifts in regulatory interpretation can create short-term instability. For companies attempting to budget for long-term decarbonization commitments, this environment presents significant challenges. A procurement strategy that depends on spot market purchases becomes increasingly difficult to manage in the face of fluctuating prices and inconsistent availability.

Adding to the complexity is the evolving landscape of emissions accounting. While several voluntary reporting programs recognize RTCs as a valid mechanism for Scope 1 reductions, the GHG Protocol has not finalized comprehensive guidance for thermal energy accounting. This creates a degree of uncertainty for companies that rely on RTCs. While the market is confident that RTCs will remain a viable instrument, buyers must be prepared for the possibility of adjustments once formal guidance is published. Maintaining robust documentation and clear retirement records is essential for ensuring compliance with future reporting expectations.

Despite these challenges, demand for RTCs continues to increase. Companies in sectors such as manufacturing, technology, food processing, and real estate are recognizing that thermal decarbonization is critical for meeting near-term sustainability targets. Many organizations have already addressed Scope 2 emissions through renewable electricity procurement and are now turning their attention to the more difficult problem of direct emissions. RTCs provide an immediate mechanism to reduce reported emissions while companies explore long-term solutions such as electrification, hydrogen blending, or advanced heat recovery technologies.

The market is also seeing growth in interest from companies seeking to support the development of new RNG projects. Long-term purchase agreements offer a way for businesses to secure more predictable pricing, reduce exposure to transportation credit volatility, and contribute to the expansion of renewable thermal infrastructure. These agreements also help developers access financing by providing a stable revenue stream, enhancing the feasibility of new projects that would otherwise face uncertain economics.

AFS Commodities USA works closely with clients to navigate the unique characteristics of the RTC market. The firm provides analysis of compliance credit markets, assesses pricing risk, and identifies supply opportunities that align with corporate decarbonization goals. This expertise is essential for companies seeking to balance cost, credibility, and long-term planning in a market shaped by external forces and limited supply.

The firm also supports companies through the evolving accounting landscape, ensuring that procurement strategies align with recognized reporting standards and are resilient to potential changes. This includes guidance on documentation, retirement procedures, and integration of RTCs into broader sustainability reporting frameworks. For clients entering long-term agreements, AFS evaluates project attributes, conducts due diligence on developers, and assesses whether the procurement supports broader corporate objectives beyond emissions reduction.

Looking ahead, the RTC market will remain complex and constrained. Transportation compliance programs will continue to dominate demand. RNG production will expand, but structural limitations will persist. Accounting standards will evolve. Companies that engage early, adopt multi-year procurement strategies, and diversify their approaches will be best positioned to manage these challenges.

Renewable Thermal Certificates are not the complete solution for Scope 1 decarbonization, but they are a vital tool in the current landscape. They offer an immediate and credible pathway to reduce direct emissions while long-term technologies and infrastructure continue to develop. With the right strategy and expert guidance, companies can navigate scarcity, manage risk, and contribute meaningfully to the growth of renewable thermal energy across North America.