The California Senate is considering the nation’s first “truth in advertising” standards for claims associated with carbon credits or offsets. Pursuant to the proposed legislation (SB 1762), authored by Senate President pro Tem Don Perata, it would be unlawful for any person to represent in an advertisement or in any sales or promotional materials that a greenhouse gas “credit” reduces greenhouse gas emissions unless it meets certain conditions. Violators could face fines, as well as civil liability to recover the cost of the credit.

This is not the first time California has weighed in on the need for greater regulation of the carbon market. In February 2008, the California Attorney General co-signed a letter to the Federal Trade Commission (FTC) from 9 states (AR, CA, CT, DE, IL, ME, NH, OK, and VT) urging the Commission to take action to amend its green marketing guidelines to address the growing carbon market. Unlike the ongoing FTC proceeding, however, the proposed California legislation would provide specific standards applicable to offsets sold on the voluntary market in California.

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For further information about this topic, please contact Akin Gump.

The current impasse on climate change legislation may leave the Federal Trade Commission (FTC), not the Environmental Protection Agency, with the strongest hand to set policy for carbon offset projects in the United States. In response to the increasing number of carbon-related claims being placed on consumer products (e.g., “carbon neutral,” “green,” “sustainable”), the FTC initiated several proceedings in the last six months to evaluate the need for formal guidance for the voluntary carbon offset markets.

FTC regulates false and deceptive advertising, including environmental marketing claims, through its oversight authority under section 5 of the Federal Trade Commission Act. FTC enforces such claims on a case-by-case basis, using environmental marketing guidelines (Green Guides) to establish presumptive safe harbors with respect to marketing practices. While the Green Guides are not enforceable regulations per se, the Commission uses them as a reference point in assessing the legality of specific marketing claims and emphasizes that “conduct inconsistent with the positions articulated in these guides may result in corrective action.”

FTC recently closed the period for public comments on whether the Commission should update its Green Guides to address the growing corporate and consumer retail carbon market. In this post, we analyze FTC’s options for providing guidance on a specific aspect of carbon marketing claims: whether and how emissions reductions projects must meet the criteria for “additionality.”

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The states of Arkansas, California, Connecticut, Delaware, Illinois, Maine, Mississippi, New Hampshire, Oklahoma, and Vermont have joined the chorus of voices urging the Federal Trade Commission to increase its understanding of, and oversight over, the growing market for carbon offsets and renewable energy certificates (RECs).  In a seven-page letter to the Federal Trade Commission dated January 25, 2008, the states express concern that “[t]he lack of common standards and definitions, along with the intangible nature of carbon offsets, makes it difficult if not impossible for consumers to verify that they are receiving what they paid for and creates a significant potential for deceptive claims.”

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For further information about this topic, please contact Akin Gump.