In the global race toward net-zero emissions, multinational corporations face a distinct challenge when accounting for operations outside of mature, regulated markets like North America and Europe. While the US relies on its regional REC registries, a standardized, internationally recognized instrument is required to validate renewable energy usage claims across high-growth economies in Latin America.

This indispensable instrument is the International Renewable Energy Certificate, or I-REC.

I-RECs are not merely an administrative convenience; they are the strategic linchpin that allows companies to reconcile complex, diverse energy markets with stringent, globally harmonized reporting standards such as the Greenhouse Gas (GHG) Protocol, RE100, and CDP. The I-REC mechanism provides the accountability and transparency necessary to track clean energy consumption across dynamic emerging markets, transforming localized generation into a verifiable global environmental commodity.  

Yet, this market is fraught with complexity. Unlike the relatively unified North American REC market, the I-REC landscape in the Americas is a mosaic of extreme price segmentation, volatile regulatory regimes, and varying degrees of market maturation. Mastering I-RECs requires a deep understanding of the strict geographic rules that govern them and the unique political economy of high-growth nations like Brazil, Chile, and Mexico.

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The Global Standard: Defining the I-REC and its Credibility Mandate

The International Renewable Energy Certificate (I-REC) is a standardized Energy Attribute Certificate (EAC) that represents the environmental attributes of one megawatt-hour (MWh) of electricity generated from a renewable source outside of traditional Western markets. Issued under the globally recognized I-REC Standard, these certificates serve as definitive proof of renewable energy generation, documenting crucial information such as the generation date, specific location, and technology type (e.g., solar, wind, hydropower).  

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The Necessity of Standardization

The existence of a formal tracking system like the I-REC Standard is critical for establishing credibility in countries that lack their own fully harmonized national certificate schemes. The certificates are not just transactional tools; they function as a mechanism for international accountability. When an I-REC is purchased and retired in favour of a specific organization, that organization exclusively owns the environmental benefits of that unit of energy, such as the lower emissions profile, ensuring protection against double counting.  

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Alignment with Global Reporting Frameworks

The legitimacy of the I-REC is internationally validated by its alignment with the highest-level sustainability reporting frameworks. Specifically:

• GHG Protocol Scope 2 Guidance: I-RECs are explicitly referenced as meeting the key quality references for the GHG Protocol Scope 2 Guidance. This is paramount because it allows companies to utilize the market-based method to reflect their conscious purchasing decisions and claim a reduction in their Scope 2 emissions (those associated with purchased electricity, heat, or cooling).  
• RE100 and CDP: The certificates are directly referenced as meeting the strict requirements of international initiatives like RE100 (which demands 100% renewable electricity usage) and CDP (the global environmental disclosure system).  

For multinational corporations, this global alignment simplifies reporting. A single procurement strategy focused on I-RECs allows for verifiable claims across over 68 countries worldwide, making it the most common and versatile solution for energy sourcing in emerging markets. This high level of standardization allows corporate sustainability claims to be seamlessly integrated into global environmental, social, and governance (ESG) disclosures.  

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The Geographic Integrity Mandate: Localized Sourcing in Latin America

While I-RECs are globally recognized, their actual use is governed by a fundamental principle designed to enforce environmental integrity and maintain a localized investment signal: the Locality Rule.  

The Locality Rule dictates that in order to successfully claim renewable electricity use in a specific country; a company must purchase I-RECs generated within that exact same country. This is a critical strategic consideration for any multinational organization operating across Latin America, which represents the primary I-REC market in the Americas.  

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Preventing Market Dilution

This strict geographic constraint prevents a critical type of arbitrage the ability to offset a high-emission load in a politically volatile or high-cost country (e.g., Mexico) with cheap, low-risk attributes sourced from an oversupplied, stable market (e.g., Brazil). If such inter-country trading were permitted, it would severely dilute the financial signal necessary to drive new renewable energy investment in regions where it is most needed and where the generation is actually occurring.  

The Locality Rule ensures that corporate procurement decisions directly benefit the grid and the renewable energy development of the jurisdiction where the environmental claim is being made. For large corporate buyers, this mandate requires a granular, country-by-country budgeting and procurement model, as they cannot treat the Latin American I-REC market as a single fungible unit. Each country represents a distinct market, with unique supply dynamics, regulatory profiles, and resulting price points that must be managed independently.

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South America's Booming, Bifurcated Voluntary Markets

The I-REC market across South America demonstrates a sharp bifurcation based on resource abundance and the absence of national mandates. In the major I-REC markets of Brazil, Chile, and Colombia, demand is driven entirely by voluntary corporate procurement and the push to meet ESG targets, rather than by mandated renewable quotas like the U.S. Renewable Portfolio Standards (RPS).

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The Stable Giant: Brazil

Brazil, a country with substantial renewable energy resources particularly hydropower and wind has quickly become a significant player in the I-REC market, despite the lack of a federal mandate.  

• Massive Volume: I-REC sales in Brazil hit 4 million in 2020 and more than doubled in the following year, reaching 9.5 million certificates as demand from enterprises voluntarily reporting carbon emissions surged.  
• Low and Stable Pricing: This high volume, driven by robust supply, maintains exceptionally low pricing. Argus assessments for current-year Brazilian wind and hydropower I-RECs averaged a stable $0.18/MWh to $0.20/MWh in recent assessments.  

For corporate buyers, Brazil represents a high-supply, low-risk, and low-cost environment for Scope 2 reduction. While the low price makes meeting volume targets highly cost-effective, it also suggests that the I-REC purchase provides less of an additionality signal; the certificates are so inexpensive that they contribute minimally to the financial feasibility of new project development. The strategic buyer must recognize that procurement in Brazil maximizes volume and cost efficiency but may not satisfy the most stringent requirements for demonstrating incremental impact.

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Explosive Demand in the Pacific Cone: Chile and Colombia

Conversely, markets in Chile and Colombia demonstrate explosive growth rates, driven by aggressive corporate demand and improving local renewable resources.

• Chile's Boom: Chile’s I-REC market is characterized by abundant renewable energy and rapidly rising demand from businesses. The number of registered renewable energy plants including solar, wind, and hydropower has surged from only six in 2018 to 79 today, reflecting the rapid expansion of eligible capacity. As a result, redemptions (the official retirement of I-RECs against consumption) surged more than five times year-on-year in recent assessments.  
• Colombia’s Growth: Colombia has also experienced a massive surge in demand, with redemptions increasing by approximately 85% year-on-year, reaching 4 TWh in recent periods, solidifying its place as a major I-REC hub.  

These markets, characterized by rapid growth and high corporate demand, signal a strong commitment to decarbonization from the local private sector. While volumes remain low compared to the energy generated only 7% of 36 GWh of renewable energy was registered in Chile recently the high redemption growth rate underscores a volatile but expanding demand signal that is forcing suppliers and registries to increase capacity and lower administrative costs (e.g., the cost of registration in Chile is projected to decrease as more businesses sign up).  

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The Mexican Anomaly: Pricing Political and Regulatory Risk

The I-REC market in Mexico presents the most profound strategic challenge in the Americas, acting as a critical case study in how political risk translates directly into commodity price volatility.

While Mexico has significant redemption volumes (2.1 TWh redeemed, a 55% year-on-year increase), the pricing dynamics are starkly different from the high-supply, low-cost model seen in Brazil.  

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Volatility and High Cost

In Mexico, the prices for wind and solar I-RECs are not only volatile but are significantly higher than the rest of the region, recently valued at $3.25/MWh, with offers reaching as high as $4.50/MWh. This price premium, which is more than twenty times the cost of a Brazilian I-REC, is the market’s calculation of regulatory uncertainty.  

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The Impact of Regulatory Risk

The dramatic pricing in Mexico is directly correlated with political uncertainty. Reports indicate that the future of the I-REC market in Mexico is "endangered" by proposed power reform plans aimed at restraining private-sector investment in renewable energy. Such regulatory threats undermine long-term project finance and supply stability, creating a scarcity premium on the tradable environmental attribute.  

For multinational corporations, the strategic implication is clear: the high price in Mexico is the necessary compensation for the elevated political risk associated with securing long-term, verifiable supply in that jurisdiction. The Locality Rule dictates that Mexican operations must purchase Mexican-generated I-RECs, forcing buyers to absorb this price volatility into their localized compliance budgets. This contrasts sharply with North American RECs, where volatility is driven by compliance caps (ACP); in Mexico, the volatility is driven by the perceived risk of future supply constraint imposed by policy.  

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Strategic Considerations for I-REC Procurement

For any corporation with operations in Latin America, an effective I-REC strategy must integrate market knowledge with strict compliance requirements.

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Integration with Scope 2 Accounting

The primary function of the I-REC is to enable market-based Scope 2 accounting under the GHG Protocol. Strategists must ensure that every purchased I-REC meets the Protocol’s Quality Criteria and is accurately retired against the corresponding consumption data. This administrative rigor is non-negotiable for defending corporate climate claims against increasing scrutiny from investors and regulators.  

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The Cost of Accountability

While the price per MWh is often low (as in Brazil), the administrative costs associated with maintaining market integrity are an important factor. For example, the registration cost for I-RECs in Chile is approximately €1,000 every five years per project. These administrative barriers, though they may be decreasing with market maturation, contribute to the overall cost of compliance and must be factored into the total cost of ownership for the certificates. The investment in robust, third-party verified registries like the I-REC Standard is essential to maintain the sanctity of the market and the credibility of the claims made.  

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Future Outlook

The I-REC market in the Americas is set for continued, if volatile, growth. While Brazil provides a foundation of stable, low-cost volume, the high demand in markets like Chile and Colombia will drive rapid infrastructure expansion. The strategic focus must remain on mitigating localized political risk, such as that seen in Mexico, and utilizing the flexibility of the I-REC Standard to drive demonstrable impact across diverse, high-growth energy economies. The I-REC ensures that capital flows into verifiable renewable projects, enabling the region to meet the demands of global corporate decarbonization mandates.

Navigating the unique policy frameworks and localized political risks that drive the I-REC market across the Americas requires specialized intelligence. From managing the low-cost volume of Brazil to hedging against the regulatory volatility of Mexico, successful procurement demands deep insight into attribute quality and geographic constraints.

To optimize your global Scope 2 reporting and secure verifiable, high-impact attributes across the entire environmental commodity spectrum, partner with experts who specialize in strategic asset management across the full range of AFS commodities.