Green Marketing Claims – FTC Green Guides: Renewable Energy and Carbon Offsets

2When informing customers, clients and consumers about the new solar panels located at your business, is there any difference between saying that the electricity is being “powered by solar energy” versus “generating energy from the sun”?  Yes, there very well could be.  According to the Federal Trade Commission (FTC) and other regulators, when it comes to advertising a business’s best intentions to obtain energy from more climate-friendly sources, it could be the difference between a truthful advertisement and consumer fraud. The line between the two could depend on whether the Renewable Energy Credits (RECs) associated with the new solar panels are retained or sold.

The rapid development of renewable energy projects and the marketing of the environmental attributes associated with them have attracted the FTC’s attention and that of several other regulators (including several states’ attorneys general and even the Vermont Public Service Board).  The FTC’s draft revised Guides for the Use of Environmental Marketing Claims (Green Guides) was published almost eighteen months ago and observers still await its final publication.  What is delaying the FTC in releasing the final revised guides?  Some observers suspect the delay could be due to the thousands of comments the agency received, many in response to the Green Guides’ proposed handling of renewable energy and carbon offset claims.

The Green Guides are not binding regulations.  The Green Guides provide marketers with insight into how the FTC may define deceptive marketing claims under the Federal Trade Commission Act (FTC Act).  The FTC Act gives the FTC broad powers to prosecute “deceptive acts or practices,” including misleading advertising and marketing.

The proposed Green Guides guidance on renewable energy includes:

  • Marketers should not make unqualified renewable energy claims if the power used to manufacture any part of the product was derived from fossil fuels.
  • Marketers should qualify claims by specifying the source of renewable energy (e.g., wind or solar). Additionally, marketers should qualify claims if less than all, or virtually all, of the significant manufacturing processes involved in making the product/package were powered with renewable energy or conventional energy offset by renewable energy certificates (“RECs”).
  • Marketers that generate renewable energy (e.g., by using solar panels), but sell RECs for all of the renewable energy they generate should not represent that they use renewable energy.

Guidance offered by the FTC on carbon offsets includes the following:

  • Marketers should have competent and reliable scientific evidence to support their carbon offset claims, including using appropriate accounting methods to ensure they are properly quantifying emission reductions and are not selling those reductions more than once.
  • Marketers should disclose if the offset purchase funds emission reductions that will not occur for two years or longer.
  • Marketers should not advertise a carbon offset if the activity that forms the basis of the offset is already required by law.

Here in Vermont, the Public Service Board has addressed renewable energy marketing claims in the context of renewable energy projects participating in Vermont’s Standard Offer program (also known as a Feed-in Tariff).  In Vermont’s Standard Offer program, selected new renewable projects enter into a long-term power purchase agreement (PPA) with the program’s facilitator.  Under the PPA, all of the renewable and other environmental attributes of the power produced at the plant are to be managed in a manner to benefit Vermont ratepayers and are sold to retail utilities.  This raises the issue of what, if any, marketing claims the plant owners can make about the environmental characteristics of the energy produced at these projects.

In some early Public Service Board (PSB) proceedings for Standard Offer projects, the Department of Public Service (DPS) asked the PSB to set conditions in the Certificate of Public Good (CPG) limiting how a project owner can describe the energy produced at the plant.  More specifically, the DPS sought a condition that would have prohibited a plant owner from doing anything that could “cause the renewable energy credits (“RECs”) or other environmental attributes . . . to be double counted.”  In later proceedings, the PSB required plant owners to follow all pertinent Standard Offer program rules and declined to adopt a specific condition like the one sought by DPS.

In plain terms, RECs are “double counted” when the renewable energy attributes of the energy are claimed by more than one party.  These attributes can be claimed in advertisements or marketing or in more formal ways to satisfy regulatory requirements.  No matter the nature of the claim, the attributes should only be claimed by one party.  Green-E, an organization that certifies environmental commodities and products that mitigate climate change has published several reports on “best practices” to follow when making renewable energy and climate neutrality claims.

Small and large businesses are concluding that the multiple bottom line benefits of renewable energy are compelling.  Promoting the production of renewable energy for advertising purposes, however, is increasingly complicated business.