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April 19, 2014

Revised Green Guides Take On Renewable Energy and Carbon Offset Claims

The Federal Trade Commission’s (FTC) revisions to the Guides for the Use of Environmental Marketing Claims (the Green Guides) responds to new environmental marketing claims and evolving consumer perceptions and addresses, for the first time, marketing claims about renewable energy and carbon offsets, among other topics. The Green Guides are not binding on the FTC or the public, but are intended to “help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act.” The revised Green Guides include specific advice about renewable energy certificates (REC), which could affect the participation of manufacturers, retailers and marketers in those markets.

The revised Green Guides advise companies not to make unqualified claims about renewable energy, directly or by implication, based on energy derived from fossil fuels, unless the company has purchased RECs to match the fossil fuel energy use.   Companies should also not make unqualified renewable energy claims “unless all, or virtually all, of the significant manufacturing processes used to make the product are powered with renewable energy or non-renewable energy matched with RECs.”

Importantly, the Green Guides clarify that companies that generate renewable energy, but sell the RECs for the renewable energy generated, should not represent, directly or by implication, that they “use” renewable energy because they have sold the right to characterize the energy as renewable. In addition, companies that sell the RECs should not make claims that they “host” the renewable energy facilities that produced the RECs because the FTC found that many people interpret a “hosting” claim to imply that the company used renewable energy. 

The FTC recognized, however, that not all generation claims are deceptive, and provide several examples of how a company may accurately portray its role in the generation of renewable energy. For example, a company that generates and uses renewable energy, but sells all of the RECs to a third party, could state that they “generate renewable energy, but sell all of it to others.” The FTC also cautioned power producers that generate renewable energy but sell the RECs to a third party, to “exercise caution and qualify claims about their generation by disclosing that their electricity is not renewable.”

The revised Green Guides also include limited guidance on carbon offset claims, advising that companies should: (1) ensure that there is competent and reliable scientific evidence to support their carbon offset claims, including the use of appropriate accounting methods to ensure that the offsets are not double counted or “used” more than once; (2) clearly disclose if the offset purchase funds emission reductions that will not occur within two years; and (3) not advertise or claim an offset if the activity producing the “offset” is legally mandated. The FTC noted that while it was not proposing detailed guidance in all aspects of carbon offset marketing claims, if necessary, it can still act pursuant to Section 5 of the FTC Act to stop deceptive practices involving carbon offset claims.

The Green Guides are vital for companies to avoid claims of deceptive advertising. In recent years, the FTC has pursued enforcement actions on various environmental claims, including “free-of” claims, deceptive claims regarding energy efficiency and cost-savings, and deceptive biodegradable claims.

© 2014 McDermott Will & Emery

About the Author

Partner

Debra A. Harrison is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, DC. office.  As a member of the Corporate Department, Debra focuses her practice on renewable energy transactions, general corporate matters, franchising, licensing and distribution matters, as well as other business growth strategies.

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