Federal Trade Commission Examines Green Marketing and Carbon Offset Markets

With increased concern about climate change, but limited government action, voluntary carbon markets have bloomed in recent years.  The Federal Trade Commission (FTC), which regulates advertising claims, is now taking a closer look at these new carbon offset markets to gauge how the money they attract is being invested.  The FTC held a workshop in early January and is considering revising its environmental marketing guides to address sales of carbon offsets markets as well as renewable energy credits (RECs). 

Carbon offsets are credits that correlate to quantifiable reductions in greenhouse gas credits.  Purchasers of carbon offsets can claim that their carbon-emitting activity, such as travel, is offset by unrelated beneficial measures.  Common examples include tree planting or forest preservation, as well as investment in generation of energy from low-carbon-emissions sources.  Carbon offsets are typically measured in volumes of carbon.  RECs are quantifications of energy produced with renewable means, and are measured in megawatt-hours.  Voluntary REC markets allow buyers to purchase RECs to support renewable energy development.  State renewable portfolio standards also rely on RECs to quantify utilities' mandatory procurement of renewable energy. 

The concern related to carbon offsets and RECs is whether the funds from voluntary sales are being used in legitimate or constructive ways.  Concerns have been voiced over issues such as whether eligible projects might oversell credits, or, even if not, whether the money paid goes to existing projects or projects that would have happened anyway.  For example, if an existing, operating windfarm that was built without any sales of RECs or carbon offsets subsequently obtains additional funds from such sales, there is arguably no additional environmental benefit obtained from these REC or carbon offset sales.

The FTC is inviting comments on carbon offset guidelines until January 25 and on environmental marketing guidelines until February 11, and will subsequently decide how and if to revise the marketing guides.