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Brown Calls on FTC To Guard Against Fraud In The Carbon Offset Market

Friday, January 25, 2008
Contact: (415) 703-5837

WASHINGTON DC – Citing the potential “to manipulate the system,” California Attorney General Edmund G. Brown Jr. today recommended that the Federal Trade Commission sharpen its guidelines for businesses that sell carbon emission offset credits.

“The Federal Trade Commission must set clear guidelines for the sale of carbon offset credits,” Attorney General 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.”

Ordinary 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. Currently, the market for these offsets is volatile, largely unregulated, and has serious potential for fraud.

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 several 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.

Among the recommendations to the Federal Trade Commission are the following:

• 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

The states also called for a clearer definition of what qualifies as a carbon offset. 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.

For more information on the Federal Trade Commission’s review of carbon offset markets, visit: http://www.ftc.gov/bcp/workshops/carbonoffsets/index.shtml

The state’s letter is attached.

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Carbon Offset Letter482.09 KB

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