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FTC Moves Toward Revising its “Green Guides” to Cover Carbon Offsets

Beveridge & Diamond, P.C., November 28, 2007

The Federal Trade Commission (FTC) announced yesterday that it is undertaking a formal process that may lead to the revision of its guidelines on environmental marketing claims, with a particular focus on those regarding carbon offsets and renewable energy certificates (RECs). The FTC is initiating a general review of its “Green Guides” and in addition is soliciting comments as to whether they should be revised to cover offsets and RECs specifically. The FTC also will be conducting a special workshop to examine the market for offsets, RECs and related advertising claims. This may be the first step toward federal oversight of the voluntary market for offsets and RECs, and may also include broader attention to related green marketing claims such as those relating to the “carbon neutrality” of products or facilities.

Carbon offsets are credits that consumers, businesses, and government agencies can buy to compensate for the global warming emissions caused by driving, using electricity, or other activities. Renewable energy credits allow corporations and other buyers to purchase electricity from wind power and other renewable sources, with the amount of power represented by certificates that can be purchased and traded as a commodity. While there are a number of voluntary standards and third party certifiers, the market is not currently subject to a uniformly adopted “quality” standard that sets terms for eligibility or verification criteria. Similarly, there are no agreed standards for how to measure or evaluate claims of “carbon neutrality,” although the number of companies making such claims has grown significantly over the past year.

The FTC undertook this effort in response to a request from a Congressional committee. In a July 18 letter Rep. Edward J. Markey (D-Mass), the chairman of the House Select Committee on Energy Independence and Global Warming, requested that the FTC review the offsets market to prevent unfair or deceptive trade practices, stating that “purchases of carbon offsets are largely unregulated and, as the practice becomes more widespread, the potential for false marketing claims grows.” FTC Chair Deborah Platt Majoras agreed that this emerging market poses unique consumer protection challenges.  “[I]t is very difficult, if not impossible, for consumers to verify the accuracy of a seller’s claims,” she wrote in an August 9 response to Markey’s request.

In a Federal Register notice published today the FTC announced that it has scheduled a workshop for January 8, 2008 to examine the carbon offset and RECs markets and their related advertising claims. At that workshop the commission will seek input on the need for more direct FTC guidance than that already provided by the “Green Guides,” formally known as the FTC’s “Guides for the Use of Environmental Marketing Claims.” Though the Green Guides do not have the force of law, they indicate how the FTC will apply Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, to environmental marketing claims. The Green Guides have not been revised since 1998 and, although they include general guidance on green marketing claims (e.g., the need to substantiate such claims) that may apply to these products, they do not specifically cover the relatively new markets for carbon offsets and RECs. 

With respect to its general review of the Green Guides, the FTC is specifically requesting comments on the benefits provided to consumers by the Green Guides; what if any modifications should be made to the existing publications; the costs imposed on consumers or on businesses by the guides; and a detailing of the potentially unfair or deceptive environmental claims that are not covered by the guides.  

With respect to the carbon offset and REC-specific workshop on January 8, public comments can be submitted before or after the workshop, but must be submitted to the FTC by January 25 at http://secure.commentworks.com/ftc-carbonworkshop.  Comments on the regulatory review should be submitted by February 11 and may be submitted at https://secure.commentworks.com/ftc-GreenGuidesReview.  Beveridge & Diamond will continue to closely follow the FTC’s review of the voluntary carbon offset market.

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For more information, please contact Nicholas van Aelstyn (nvanaelstyn@bdlaw.com), Russell LaMotte (rlamotte@bdlaw.com) or David M. ("Max") Williamson (dwilliamson@bdlaw.com).