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.

The Transport Emission Reduction Certificate (TERC) Program was launched in June 2023 with the introduction of the Digital Ethanol methodology. The program expanded this year in November with the introduction of the methodology for TERCs for biomass-based diesel, which encompasses Digital RD and Digital Biodiesel.

The program aims to accelerate the decarbonization of the U.S. transportation sector by focusing on low-carbon fuels within the fuel-vehicle system. This voluntary carbon program, driven by a market-based mechanism, fosters innovation in clean fuel technologies and advances the transition to a low-carbon economy by providing organizations with a pathway to address their sustainability goals through investment in scaling low-carbon solutions.

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.

Certificates can be issued through the TERC Program by accounting for the full well-to-wheel carbon intensity (GHG footprint) of the physical fuel. This includes emissions from feedstock production, feedstock transportation, fuel and co-product generation, fuel transportation, distribution, and combustion. The carbon intensity is calculated using lifecycle analysis, based on a version of Argonne’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) Model, similar to the methodology employed by California’s Low Carbon Fuel Standard (LCFS).

The calculated carbon intensity is compared against a benchmark representing petroleum alternatives. This benchmark decreases over time to drive greater emissions reductions. Certificates are generated based on the environmental attributes of the fuel, measured in metric tons of CO2e, representing the difference in emissions between the low-carbon fuel and its petroleum-based counterpart.

Item desTERCs can be unbundled from the physical low-carbon fuel and sold separately to third parties interested in claiming the environmental attribute, even when physical access to the low-carbon fuel is not possible. Much like renewable energy certificates (RECs)—which establish a 1:1 correspondence between grey MWhs sourced from the grid and green MWh claims procured—TERCs allow end-users to purchase the right to claim the low-carbon attributes of alternative transportation fuels. This mechanism incentivizes ongoing decarbonization in the fuel sector while offering flexibility to corporations seeking to align with sustainability goals.

That being said, TERCs are fuel-level certificates. For emissions from diesel trucks to be included in the calculation, a corporation must first account for its own diesel fuel use and related carbon emissions. This requires quantifying the emissions generated and identifying the proper Scope 1 (direct emissions from company-owned vehicles) or Scope 3 (emissions from contracted transport or supply chains) bucket. TERCs can then be applied to offset these emissions, reflecting the substitution of diesel with low-carbon fuels such as biodiesel or renewable diesel.
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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.

The Transport Emission Reduction Certificate (TERC) program has the potential to significantly benefit the economies of communities involved in the production of raw materials and biofuels. By establishing a market for low-carbon fuel attributes, TERCs incentivize the increased production of green fuels. Growing demand directly supports local economies by creating jobs in agriculture, biofuel production, and related supply chains. These benefits could be particularly impactful in rural regions, where feedstocks are grown, and biofuel production facilities are often located, fostering economic growth and resilience in these communities.

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.

The TERC Program currently focuses on fuels for ground transportation, including ethanol, renewable diesel, and biodiesel. Additionally, an EV methodology is under development, and other transportation fuels are being considered for future inclusion.

Yes — and this is a core feature of the TERC Platform.

A TERC reflects the net well-to-wheel lifecycle carbon reduction of a verified batch of low-carbon fuel. The calculation compares:

Petroleum benchmark CI | minus |The fully verified CI of the alternative fuel

That alternative fuel CI already includes:

• Feedstock sourcing and transport

• Conversion and production

• Coproduct handling

• Distribution

• Combustion

This structure is similar to established book-and-claim systems used across aviation, shipping, and other low-carbon fuel programs.

Learn more about how lifecycle carbon intensity is used on the TERC Platform at https://www.terc-energy.com/.

The TERC Program is designed to align with the core principles outlined in the AIM Platform’s draft Quality Accounting and Reporting guidance, including accuracy, auditability, transparency, and unique assignment of claim rights.

TERC meets these criteria through:

• third-party verification under an SSAE-19 Agreed-Upon Procedures (AUP) audit,

• registry-based issuance, transfer, and retirement of certificates,

• clear separation of environmental attributes from physical fuel, and

• exclusive assignment of the right to report emissions reductions to the TERC holder.

As voluntary accounting standards evolve, the TERC Program continues to evaluate areas where requirements may be overly burdensome for fuel-based interventions and will incorporate refinements through periodic methodology updates and stakeholder engagement.

Under the TERC Program, ownership of physical fuel does not convey the right to claim emissions reductions. The right to report follows the TERC certificate, not the gallon of fuel.

This is enforced through three layers:

1. Attribute separation by design
Environmental attributes are retained by the producer unless explicitly transferred through a TERC. Physical fuel is sold as fuel-only, without carbon attributes.

2. Exclusive assignment via contracts and the registry
Each verified emissions reduction results in a single TERC issued on the Xpansiv Digital Fuels Registry.
Only the entity that holds and retires the TERC has the right to report the reduction.

3. Audit-level enforcement
In any assurance review, the test is straightforward:
Does the reporting entity hold the TERC and the contractual right to the environmental attribute?
If not, a Scope 1 or Scope 3 claim is not valid under AIM, the GHG Protocol, or SBTi.

TERC does not attempt to police behavior; it ensures that only the TERC holder can make an auditable claim.

For renewable diesel delivered directly by truck to an end-use fleet, the TERC Program applies additional safeguards:

• Only gallons that do not convey environmental attributes through regulated or bundled use are eligible.

• RD delivered directly to an end-use fleet for physical combustion is excluded from TERC generation.

• No TERC is issued for these gallons, eliminating the possibility of overlapping claims.

Where RD is eligible for TERC generation:

• contracts explicitly separate physical fuel from environmental attributes,

• physical recipients must report Scope 1 emissions using conventional diesel emission factors unless they purchase TERCs, and

• eligibility is confirmed by independent verification bodies as part of the audit process.

This approach aligns with AIM requirements for transparent disclosure and clear allocation of claim rights.

Pump labeling requirements disclose physical blend content but do not transfer environmental attribute ownership.

Under the TERC Program:

• Biodiesel producers retain environmental attributes unless transferred via TERCs.

• Station operators and pump users receive only the physical energy content.

• Only the entity that holds and retires the TERC may report the associated emissions reduction.

A fleet may accurately state that it used B20 fuel, but it cannot claim the verified emissions reduction unless it also holds the corresponding TERC. In audit, the determining factor is possession of the TERC retirement record.

Yes. The TERC Program includes formal producer attestations as part of its verification framework and continues to strengthen this requirement.

Producer attestations confirm that the submitted data is complete, accurate, and truthful, and that it forms the basis of a transferable environmental attribute. This supports transparency, auditability, and alignment with best practices used in regulated and voluntary fuel programs.

The Renewable Fuel Standard is a volumetric program and does not require or reward carbon intensity performance.

TERCs:

• are not used for regulatory compliance,

• represent emissions outcomes not required by law, and

• monetize verified CI performance beyond RFS obligations.

This constitutes multiple conformity, not double counting. The RIN satisfies a regulatory requirement, while the TERC represents a voluntary, performance-based emissions outcome derived from verified lifecycle CI data.

TERCs introduce a performance-based incentive tied to verified carbon intensity reductions. This can:

• support continued operation of low-CI facilities during challenging market conditions,

• improve the economics of CI-reducing investments,

• reward producers that deliver lower-CI fuel, and

• strengthen the case for future capacity expansion.

By directing voluntary demand toward lower-CI production pathways, TERCs help maintain and expand decarbonized fuel supply in markets without CI-based regulation.

Yes. The TERC Program provides access to calculators and supporting data that translate TERCs into underlying fuel volumes and applicable emission factors. This supports integration into Scope 1 and Scope 3 market-based inventories.

TERC methodologies rely on established lifecycle analysis frameworks and third-party verification. These include safeguards related to feedstock sourcing, environmental compliance, and traceability. Indirect land-use change (ILUC) is addressed through CA-GREET modeling assumptions and conservative eligibility rules.

Supporting documentation is available upon request.

TERCs are verified under an SSAE-19 Agreed-Upon Procedures (AUP) audit conducted by independent Verification and Validation Bodies (VVBs).

Verification includes:

• data validation and reconciliation,

• CI model review,

• sampling and traceability checks, and

• registry readiness confirmation.

Verification occurs on an ex-post basis following fuel production.

TERCs are currently issued ex-post only. Fuel must be produced and verified before any TERC is issued.

Ex-ante structures may be evaluated in the future, but verification prior to issuance remains a core requirement.

TERC uses CA-GREET for lifecycle carbon intensity calculations, which already includes all material Kyoto Protocol greenhouse gases. No excluded gases approach the AIM 1 percent materiality threshold, and independent verification ensures completeness.

The registry operator functions solely as a neutral system of record. It performs technical and transactional functions only and does not influence program rules, eligibility, verification requirements, or claims guidance.

This separation aligns with AIM requirements for independent tracking infrastructure.

Each TERC record includes, at minimum:

• verified emissions outcome and units,

• fuel type and production date range,

• facility name and location,

• CI pathway and baseline reference,

• verification body and audit confirmation,

• issuance date and serial number, and

• retirement status and beneficiary (where applicable).

These data fields align with AIM recommendations for intervention records.

TERC records are created only after fuel production has occurred. Verification follows established audit cycles, and issuance occurs well within AIM’s 24-month timing expectation. TERCs are never issued based on projected outcomes.

No. TERCs represent real, measurable well-to-wheel lifecycle emissions reductions relative to a petroleum baseline. They do not include avoided or hypothetical emissions.