To judge by advertising, American shoppers have more ways to “go green” than ever before. As American consumers become increasingly conscious of environmental impacts, more and more products are being marketed as “green.” According to polling data, nearly 7 in 10 Americans would be more likely to make purchases from a company that used environmentally friendly practices. When it comes to finding these products, however, many consumers rely on manufacturers’ labels. Since 2012, the Federal Trade Commission (FTC) has issued “green guides,” which help to ensure that manufacturers’ environmental marking claims are accurate. These labels are coming under increased scrutiny under President Trump’s FTC, particularly after critics have pointed out that renewable energy credits allow manufacturers to take credit for clean energy programs that benefit from taxpayer support for clean energy.
The FTC first began to issue guidelines for environmental marketing claims more than 20 years ago. In 1996, they passed early regulations addressing eight specific environmental claims: “degradable,” “compostable,” “recyclable,” “recycled content,” “resource reduction,” “refillable,” and “zone friendly/safe.” While some of these phrases remain on labels today, the world of environmentally-friendly products has grown substantially, with green energy taking a larger and larger role. Over the course of the following decades, the green guides were revised several times. Among the more recent amendments were details about energy sources and what could be termed clean or renewable energy.
The most significant of these revisions occurred in 2012, when the FTC added a section addressing renewable energy marketing claims. For the first time, the FTC began to address some fundamental topics in the green energy world, including things like defining what “renewable energy” meant.
On some level, the term is almost always a misnomer. The United States gets its electricity from a variety of generation sources–the so-called generation mix that is the subject of a great number of high level discussions among energy regulators. Despite the fuel used, all generation methods result in the same electricity, which is fed into a single unified grid.
As a result, it is literally impossible to determine the precise origins of the power being used by any particular company at a specific time. After all, the electrons are identical. Instead, most companies promoting their green sources rely on renewable energy credits sold by other entities with renewable energy facilities. Renewable energy credits can be considered a sort of inverse of carbon credits. Rather than paying to remove carbon from the energy equation, renewable energy credits add clean electricity to the grid. The market for these credits has grown rapidly over the past several years, more than doubling between 2013 ($6.5 billion) and 2016 ($11 billion).
These arrangements are under close scrutiny from the FTC because of their potential to mislead consumers who might reasonably think that products they purchase were manufactured specifically with renewable energy. In fact, the label may simply mean that the manufacturer purchased renewable energy credits. As the market for “environmentally friendly” products continues to grow, the FTC has weighed in on marketing claims on several occurrences and is continuing to do so under the new administration.
As a result, the system has been criticized from both sides of the debate. Environmentalists say that renewable energy credits are insufficient to drive the construction of additional renewable energy generation facilities. These credits are often priced at just a few dollars, far too little to generate revenue for new alternative energy construction.
“The question of whether a new wind farm gets built is usually a function of natural gas prices, falling technology prices, and federal tax incentives, rather than being a function of REC sales,” offset expert Mark Trexler told Think Progress.
At the end of the day, the purchase of renewable energy credits does not necessarily mean that any particular amount of carbon emissions was avoided. In this, it differs from an offset. Instead, it means that somewhere in the system, a particular amount of green energy entered the electric grid.
Meanwhile, free market critics are uneasy about companies getting additional profits out of their use of green energy, which already receives significant taxpayer subsidies.Renewable energy generation facilities continue to benefit from subsidies and tax benefits that help them to remain competitive. In some areas, taxpayers subsidize more than half of the cost of wind power. On top of this, these generation companies can sell renewable energy credits to gain additional profit.
These credits are another distortion complicating American energy markets. Under the Trump administration, the FTC is reevaluating a variety of regulations governing different industries, and green guides are likely to continue to receive significant scrutiny. So far it has yet to issue new guidance on the green guidelines, but a recent FTC meeting about the subject suggest that change may be on the way.