The corporate pursuit of decarbonization has historically focused on Scope 2 emissions the indirect emissions from purchased electricity, for which the Renewable Energy Certificate (REC) is the established solution. However, a comprehensive climate strategy must confront the challenge of Scope 1 emissions: the direct release of greenhouse gases from sources owned or controlled by an organization, such as the combustion of natural gas in on-site boilers or industrial processes.

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This challenge is precisely what the Renewable Thermal Certificate (RTC) is designed to solve.

RTCs, also known as Renewable Natural Gas (RNG) Certificates or Green Gas Certificates, are the tradable environmental attributes associated with RNG high BTU biogas derived from organic waste sources like landfills and agricultural manure. The purchase and retirement of RTCs provide organizations with an immediate, verifiable claim to the environmental benefit of substituting fossil natural gas with a renewable alternative, directly reducing their reported Scope 1 footprint.  

Yet, this emerging market is governed by a distinct and complex set of dynamics. The North American RTC market is overwhelmingly driven by lucrative transportation compliance standards, leading to severe supply constraints and high price volatility for voluntary thermal buyers. Strategic procurement of RTCs requires a deep understanding of this competition, the developing regulatory landscape, and the crucial, yet incomplete, accounting framework that governs thermal energy claims.

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Mechanics and Mandate: The RTC as a Scope 1 Solution

Addressing the Thermal Challenge

For many industrial and commercial organizations, the use of natural gas for heating, cooling, or process heat represents a stubborn core of their Scope 1 (direct) emissions profile. Unlike electricity, which is tracked via EACs for the Scope 2 market-based method, thermal energy from natural gas combustion falls under Scope 1.

The RTC mechanism functions by unbundling the environmental attributes of the RNG from the physical gas commodity. When RNG is injected into the common pipeline network, its renewable attributes are tracked, measured in thermal units (typically MMBtu or GJ equivalent), and issued as RTCs. By purchasing and retiring these RTCs, the end-user gains the exclusive right to claim the environmental benefit of consuming that renewable gas, regardless of where the physical RNG molecule travelled in the interconnected pipeline system.  

This ability to match RTCs to natural gas consumption offers a crucial, fossil-free alternative for addressing these direct emissions, a solution explicitly recognized by several leading voluntary standards. RTCs are tracked through specialized systems, such as the M-RETS RTC registry and Green-e approved registries like Clean Counts, ensuring the integrity and traceability of the attribute. Examples of facilities generating RTCs include landfill gas recovery sites in Washington and Kentucky, as well as anaerobic digestion plants in Iowa and Michigan, demonstrating a diverse North American supply base.  

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The Evolving Accounting Framework: A Critical Risk

While RTCs offer an immediate path to Scope 1 reduction, the long-term accounting integrity remains a critical strategic risk for buyers: The GHG Protocol has yet to finalize comprehensive guidance on how attribute certificates apply to purchased steam, heat, and cooling.  

Leading voluntary standards, including The Climate Registry and RE100, currently allow entities to utilize RTCs to claim the environmental benefit of substituting RNG for conventional natural gas. However, the lack of final, explicit guidance from the GHG Protocol the global standard-setter means that the fundamental accounting structure for thermal attributes is less established than that for electricity EACs. Strategic buyers must maintain rigorous documentation and recognize that the emerging status of RTCs carries a heightened degree of long-term reporting risk related to claim verification and potential future adjustments once the GHG Protocol formally updates its guidance.  

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The Compliance Market Constraint: RFS and LCFS Dominance

The single greatest driver of volatility and supply constraint in the North American RTC/RNG market is the overwhelming financial competition posed by the transportation compliance markets: the U.S. federal Renewable Fuel Standard (RFS) and the California Low Carbon Fuel Standard (LCFS).

These programs incentivize the use of low-carbon fuels in the transportation sector, driving massive adoption of RNG in natural gas vehicles (which held an 84% market share in 2022). The credits generated by RNG projects under the RFS and LCFS can boost revenue for producers’ multiple times above the market price of geologic natural gas, creating an "all-in" price that is far higher than the underlying commodity value.  

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Price Volatility and Supply Scarcity

RNG developers rationally allocate their supply attributes to this highest-value market. This structural dynamic creates intense supply scarcity for corporations seeking RTCs for stationary thermal use (e.g., heating, industrial processes) in the voluntary market. Consequently, voluntary buyers must effectively compete with, or even match, the compliance market price to procure the attributes.

• Financial Risk: The RNG/RTC market is thus exposed to the historically volatile prices of these renewable fuel credits, and potential regulatory changes to the RFS/LCFS programs introduce significant financial uncertainty, which can complicate traditional financing for new RNG production facilities.
• Voluntary Solution: To mitigate this severe price risk, some developers are willing to enter long-term contracts with voluntary buyers for prices that are lower than the compliance market peak, though still substantially above the fossil natural gas price, offering stable revenue outside the volatile transportation sector.

The strategic procurement challenge for RTCs is therefore a question of financial positioning: competing with the highly lucrative transportation market to secure verifiable Scope 1 reduction assets. The ultimate value of the RTC in the voluntary thermal market is thus dictated by the demand and regulatory incentives of the transportation sector.

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Policy Divergence: Stability in Canadian Mandates

While the U.S. RTC market is dominated by tradable attributes driven by transportation standards, the Canadian approach, particularly in several key provinces, offers a contrasting model cantered on system-level decarbonization. This creates distinct stability advantages for thermal attribute procurement.

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Provincial Blending Mandates

Canadian provinces have implemented direct utility blending mandates aimed at decarbonizing the stationary natural gas distribution system:

• Quebec: Mandated a 1% RNG blend by 2020 and requires a minimum of 5% by 2025.
• British Columbia: Committed to a minimum requirement of 15% renewable content in the natural gas stream by 2030, as part of its CleanBC strategy.

These utility blending mandates create a stable, regulatory-guaranteed market for RNG destined for stationary consumption, allowing industrial and commercial end-users in these provinces to access supply with greater long-term predictability than that observed in the volatile U.S. compliance credit markets.

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Federal Incentive: Canada’s Clean Fuel Regulation (CFR)

Federally, Canada’s Clean Fuel Regulation (CFR) also incentivizes RNG usage, generating credits via the supply of low-carbon intensity fuels, including RNG or biogas. These credits are registered and traded via the Credit and Tracking System (CATS), a web-based platform that manages verification and compliance reporting.  

The Canadian framework’s emphasis on system-level gas decarbonization via mandates provides a potentially more stable supply advantage for corporate thermal procurement compared to the U.S. market’s reliance on volatile transportation fuel attributes. For a strategic buyer, seeking supply or RTCs generated in jurisdictions with robust blending mandates can provide a better hedge against compliance-driven price shocks.

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Strategic Conclusion: Securing the Scope 1 Advantage

The Renewable Thermal Certificate is a powerful, immediate instrument for organizations targeting Scope 1 emissions, but its procurement demands a clear-eyed assessment of market structure and regulatory risk.

1. Acknowledge the Competition: RTC prices are a function of their opportunity cost in the high-value RFS/LCFS transportation markets. Buyers must budget for a premium far above the geologic gas price and recognize this inherent volatility.
2. Hedge with Long-Term Contracts: To mitigate exposure to the sharp, compliance-driven price spikes, the primary strategic recommendation is to seek long-term, fixed-price contracts for voluntary thermal RTCs, thus securing revenue stability for producers and price predictability for consumers.
3. Monitor Accounting Standards: While current voluntary standards permit RTC usage for Scope 1 reduction, the outcome of the GHG Protocol’s ongoing guidance development for thermal attributes remains a critical, material risk that must be actively monitored. Organizations must be prepared to adjust reporting methodology based on the finalized international standard.  
4. Prioritize Policy Stability: Where available, sourcing from or focusing on markets governed by long-term, high-percentage blending mandates (e.g., British Columbia and Quebec) can offer greater stability and predictability than relying purely on the compliance credit trading system.

The RTC is the future of verifiable Scope 1 reduction in the Americas, providing a critical tool for meeting aggressive climate targets. However, its value and availability are inextricably linked to the policy drivers of the transportation sector and the ultimate resolution of international thermal accounting standards.

Successfully integrating Renewable Thermal Certificates into your decarbonization portfolio requires navigating intense competition from compliance markets and managing evolving accounting standards. Our expertise in strategic thermal procurement, regulatory risk modelling, and long-term contract negotiation ensures you secure the essential attributes needed to meet verifiable Scope 1 reduction goals.

Partner with us for specialized market intelligence and superior execution strategies across the entire portfolio of AFS commodities.