A market for indulgences

Back in the Middle Ages, the Catholic church found a great way to make some additional money. It sold sinners writs absolving them of their sins — on the condition that they underwent some form of penitence.

Indulgences are, from a modern perspective, controversial to say the least. To me, they started looking even more controversial when I learned that the penitence condition was not exactly observed strictly, meaning that all the sinner needed to get into Heaven was some cash to buy a dose of “treasury of merit”, which is basically virtue points taken from the selfless acts of Jesus Christ, the Virgin Mary and assorted saints.

The concept of indulgences was controversial but also weirdly familiar. Or perhaps not so weirdly. After all, “What has been is what will be, and what has been done is what will be done, and there is nothing new under the sun.”

I’ve previously tackled one form of modern indulgences, carbon offsets, but recently, another, even more fascinating form of these absolution writs came to my attention.

It’s a funny story. I was going to write about data centres and their enormous electricity consumption, which doesn’t seem to prevent their owners from claiming they are drivers of the energy transition. Yes, they really say this. So, as usual, I wondered. I wondered how exactly some of the hugest electricity consumers on Earth, and ones that consume 24/7, can claim to be drivers of the transition.

Also as usual, the answer was shocking and completely unexpected. The claims of data centre owners were based on three things: energy efficiency, power purchase agreements, and renewable energy certificates. Juicy stuff, especially the last one. Also, quite profitable. For now.

The efficiency claim is pretty much an empty one, thanks to the Jevons Paradox and the fact that efficiency gains cannot be unlimited. There is always an end to them. Otherwise by now we’d be able to go 100 miles on a single gallon of petrol. But that’s the least interesting part. RECs are way more interesting. And potentially more troublesome.

Simply put, RECs are something like a certificate of authenticity for jewellery. You buy a ring or a bracelet and it comes with a certificate guaranteeing that it was made from gold or silver with a certain degree of purity and/or came from a specific, responsible mine. Unlike certificates of authenticity, however, RECs do not come free.

You, meaning the buyer of electricity, can either purchase them from the generator or leave them. But if you do purchase them, a whole new world of opportunity opens up. The opportunity to, first, claim you’re green and, second, make a bit of cash from that claim. Kind of like carbon offsets. And we all know how the carbon offset market’s been faring recently. For those who have somehow missed it, it’s not doing too well.