The Federal Trade Commission ("FTC") today adopted
revised Guides for the Use of Environmental Marketing Claims
("Final Revised Green Guides").1 These Final
Revised Green Guides set forth the FTC's "current views
about environmental claims" and were issued nearly two years
after publication by the FTC of its Proposed Revision to the Green
Guides ("Proposed Revised Green Guides")2 on
October 5, 2010. Though they apply to advertising and marketing of
environmental benefits generally, certain provisions of the Final
Revised Green Guides have important implications for energy
companies, particularly those that market retail renewable energy
or carbon offset products, or that develop on-site renewable
facilities. Failure to comply with the guides may result in
enforcement action by the FTC under Section 5 of the Federal Trade
Commission Act.3 Those provisions most likely to affect
energy companies relate to the marketing of renewable energy
claims, general environmental benefit claims, carbon offsets, and
certificates and seals of approval.
The guidance that most directly affects energy companies,
particularly those that market renewable energy at retail, relates
to renewable energy claims. The Final Revised Green Guides retain
the original language of the Proposed Revised Green Guides
permitting the marketing of energy matched with renewable energy
credits, or "RECs," as "renewable energy." The
FTC clarifies that companies can minimize risk of deception by
specifying the source of renewable energy. For example, a product
made up of a combination of renewable energy sources should state
this fact clearly and prominently in its marketing materials, along
with a disclosure of the renewable source that makes up the
greatest percentage of the portfolio. The FTC declined to require
companies to disclose the location of their renewable energy
sources when making claims, but cautioned in its "FTC Green
Guides Statement of Basis and Purpose," also released today,
that the net impression of some advertisements could imply local
benefits, in which case a non-local source of RECs would need to be
disclosed to avoid deceptive advertising. As was the case in the
Proposed Revised Green Guides, the Final Revised Green Guides
clarify through examples that a property owner who
"hosts" an on-site renewable energy facility but does not
purchase the RECs produced by the facility may not claim it uses
renewable electricity or that it "hosts" a renewable
facility. However, the Final Revised Green Guides have added
guidance that the manufacturer may advertise that it
"generate[s] renewable energy, but sell[s] all of it to
others." This provides some additional clarity to developers
of on-site renewable energy projects.
With respect to General Environmental Benefit Claims, the Final
Revised Green Guides contain essentially the same guidance as the
Proposed Revised Green Guides. The final guides provide that
unqualified statements of general environmental benefit are likely
to be misleading and therefore should not be made. In other words,
a company may not advertise itself or a product as
"eco-friendly" or "green" without prominently
explaining the basis for the claim. The Final Revised Green Guides
also clarify that even a qualified general claim should be reviewed
to determine whether the identified environmental benefit comes at
the expense of the environment overall. For example, if reducing a
product's packaging requires more energy to make the product,
even the qualified statement "Eco-friendly -- reduced
packaging" could be deceptive.
The guidance offered by the Final Revised Green Guides with respect
to advertising of carbon offsets also remains substantially
unchanged from that contained in the Proposed Revised Green Guides.
Any claimed emission reductions must be backed by "competent
and reliable scientific and accounting methods," to ensure
that they are properly quantified and there has been no
double-counting of reductions. In addition, according to the
guides, it is deceptive to claim a carbon offset represents an
emission reduction if the reduction or activity causing it was
required by law, or to make claims that imply a carbon offset
represents emission reductions that have already occurred when the
purchased offset credits fund future projects. For example, if an
energy company attempts to sell carbon offsets based on methane
capture at one of its landfill gas facilities, but the facility is
required by law to capture all the methane gas the landfill emits,
emission reduction claims based on those "offsets" would
be deceptive.
Finally, the Final Revised Green Guides provide further information
regarding certificates and seals of approval. Certificates can be
an important marketing tool for companies who sell retail renewable
energy, allowing a customer to advertise its own renewable energy
purchase in a prominent way. The Final Revised Green Guides state
that the advertiser needs to provide the basis for any
certification, through either the name of the certification itself
or some other means. The certification also cannot be
misrepresented, either directly or by implication, as being
provided by an independent third party if that is not the case.
Accordingly, if an energy company sells a company renewable energy
and provides the company with materials "certifying" the
purchaser as "green" or "eco-friendly," those
materials should clearly and prominently explain the basis for the
certification (e.g., "ABC Company Purchased 100% Renewable
Energy in 2012"), as well as the fact that the company doing
the certifying is the same one that sold the renewable energy. Any
use of such a certification should also meet the criteria for
endorsements provided in the FTC's Endorsement
Guides.4
Though providing some needed clarity in the area of advertising of
environmental claims, the Final Revised Green Guides leave some
areas of uncertainty, particularly with respect to renewable energy
and related claims. Our attorneys have significant experience
advising energy companies with respect to environmental marketing
claims. If you have questions concerning the Final Revised Green
Guides or energy advertising issues generally, please contact any
of the attorneys listed in this alert.
Footnotes
1. 16 C.F.R Part 60: Guides for the Use of Environmental Marketing Claims.
2. 75 FR 63552 (Oct. 15, 2010).
3. 15 U.S.C. ß 45.
4. 16 C.F.R. Part 255.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.