States Seek Fraud Protection for Carbon Offset Market

Activities such as driving cars and running power plants produce greenhouse gas emissions which trap heat from the sun, causing global temperatures to rise. Under a carbon offset program, consumers are able to purchase emissions credits - which reflect specific environmental projects that reduce CO2 and other greenhouse gases elsewhere in the environment.

The national market for carbon offset credits is expected to reach $100 million annually within the next four years. Brown said. "Currently, the market for these offsets is volatile, largely unregulated, and has serious potential for fraud."

A 1 kW thin film photovoltaic array on a tracking system and a 17.2 kW system on the roof offset some of the fossil fueled power use of the Cambria Office Building in Pennsylvania. (Photo by Robb Williamson courtesy NREL)

The Federal Trade Commission is responsible for ensuring that carbon offset projects are fairly and honestly marketed to consumers. Recently, the Federal Trade Commission requested comments, by January 25, 2008, on the marketing of carbon offsets and renewable energy certificates.

In a letter sent today to the Federal Trade Commission, Attorney General Brown and nine other state attorneys general outlined potential problems with carbon offset markets and offered recommendations to the Federal Trade Commission aimed at protecting consumers.

Other states joining today's letter include - Vermont, Arkansas, Delaware, Maine, Mississippi, Oklahoma, Illinois, Connecticut and New Hampshire.

"The Federal Trade Commission must set clear guidelines for the sale of carbon offset credits," Brown said, "As more Americans try to offset their carbon emissions, the danger grows that some individuals will attempt to manipulate the system. Consumers must feel confident that they actually get what they pay for - real carbon reduction offsets."

The attorneys general recommend that the Federal Trade Commission:

• Conduct research on consumers' understanding of carbon offsets


• Ensure that offset projects do not double sell credits or claim credits for practices that are already required by law


• Engage in aggressive education and outreach to ensure that consumers understand the nature of carbon offsets and the potential for fraud

Currently, the U.S. Environmental Protection Agency asserts that offset credits can be backed by projects that will go forward regardless of whether emissions credits are sold.

An alternative offset definition would only allow the sale of credits from projects that would not otherwise have gone forward.

The states also demanded that the Federal Trade Commission consider whether renewable energy certificates - proof that energy was generated by a renewable source - should count as a valid offset. The certificates may not qualify as offsets because renewable energy does not always displace traditional energy sources.

The states recommended that the Federal Trade Commission offer consumer tips on its website and place explicit details about offsets - including the name, location and project owner - on all marketing material.

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