A TERC is a tradable digital certificate representing the full life cycle greenhouse gas (GHG) emissions of biofuel production and usage. It is the primary instrument in a market-based initiative aimed at driving down the carbon intensity of transportation fuel in the United States.

Revenue from the sale of TERCs goes back to low-carbon fuel producers to incentivize carbon-reducing innovation, expanding the benefits of a regulated LCFS into the voluntary space – expanding decarbonization of the fuel pool, avoiding emissions from transportation and logistics applications, and validating ESG commitments of the companies who acquire them.

Buyers with large scope 3 GHG footprints are investing back into their own value chain by promoting the reduction of carbon intensity of the fuels that currently power their businesses.

No, a TERC is not a traditional carbon offset.

A carbon offset represents a reduction in GHG from a specific project or activity. Carbon offsets are typically generated by projects that avoid, reduce, or remove carbon dioxide (CO2) or other greenhouse gases from the atmosphere, such as reforestation, renewable energy, or energy efficiency projects. Companies and individuals can purchase carbon offsets to compensate for their own emissions or to achieve carbon neutrality. The purchase of carbon offsets supports the development of these projects.

TERCs are a market-based incentive program intended to continually reduce the carbon intensity of transportation fuels over the course of time.

Both instruments can enable risk mitigation for organizations with net-zero targets, provide transparency in measurement of carbon reductions, and fund the transition to a low-carbon economy.

Only obligated parties can participate in regulated LCFS markets. As part of the TERC Program, biofuel producers with product that doesn’t go to a regulated market, voluntarily choose to undergo the scrutiny of an annual carbon intensity verification conducted by an independent third-party engineering and accounting firm. Producers with fuel that falls under the mandated baseline for program participation generate TERCs contingent with GHG performance of their fuel.

Voluntary buyers can acquire TERCs to claim emission mitigation.

After a verification is performed to authenticate the carbon intensity of the fuel considered in the program, a second verification is done to ensure that only biofuel volumes and emission reductions outside of regulated markets are considered.

Each TERC is serialized and accounted for individually on the Xpansiv Digital Fuels Registry™.

TERC follows the LCFS framework where decarbonization of the transportation sector is achieved by encouraging the use (and blending) of low-carbon transportation fuels into the fuel supply. The assessment of carbon reductions achieved with TERCS will, therefore, also be consistent with the claim methodology practiced by currently operating LCFS frameworks. As a result, TERC does not fully fit the requirements of emission additionality as described in the GHG Protocol.

TERCs are issued, transacted, and retired on Xpansiv’s Digital Fuels™ Registry.

The Xpansiv Digital Fuels™ Program establishes a new class of tradeable, standardized environmental assets that enable market participants to define, record, and transact the environmental attributes of energy. For specific units of energy production, transport, and use, a corresponding digital twin is registered that conveys environmental performance claims across the supply chain—substantiated by auditable data—in order to drive investment in low-carbon technologies, environmental sensing, data analytics, and next-generation standards and verification systems.

Renewable fuel producers are required to meet a certain carbon intensity (CI) standard for their products, measured in grams of carbon dioxide equivalent (CO2e) per megajoule (MJ) of energy to participate in the TERC Program. The CI is determined through a well-to-wheel life cycle analysis, or a measurement of emissions of the fuel from its feedstock, production, transportation, distribution, and use.

When producers create a product with carbon intensity below a specified baseline, they are eligible to generate TERCs based on the difference. The lower the CI, the more certificates can be generated. The baseline decreases year-over-year, incentivizing fuel producers to continually find ways to reduce CI. For more information on how TERCs are quantified, see the Quantification Standard.

Currently, ethanol producers based in the United States are eligible to create and sell TERC credits.

TERCs will be generated annually for ethanol production facilities only after calculation and independent, third-party verification of CI score for eligible fuel, and verification of product volumes produced and distributed to a qualifying jurisdiction. For more information, see Verification Standard.

TERC pricing is dynamic and benchmarked from a portfolio of comparable voluntary environmental commodity contracts. They are traded in over-the-counter transactions.

Corporate emission reduction measures are imperative in the race to net-zero. A company with mitigation goals should invest in improving energy efficiency, adopting renewable energy sources, optimizing logistics, and implementing sustainable practices in operations. However, the transportation sector faces particularly challenging and capital-intensive hurdles to abatement. Companies with large Scope 3 emissions can claim their sustainable energy choice with the purchase of TERCs and reduce the environmental impact from the fuels they use regularly. The certificates can be retired through the Xpansiv registry toward environmental stewardship goals.

Transparent communication to stakeholders about carbon reduction efforts are essential through sustainability reports, corporate social responsibility initiatives, and public statements.

Currently, ethanol is the only fuel represented as part of the TERC program. Additional transportation-related renewable fuel certificates are under development.