The Legal Climate – How to Spot Greenwashing and Assess Climate Claims
July 24, 2010
Posted Friday, July 23, 2010 on The Legal Climate Blog via Corporate Knights
By Travis Allan
Knowledge is Power
Many consumers wonder if they should believe products’ environmental claims. Consumers are educating themselves and fighting back against greenwashing, and lessons from these fights can help inform consumers about climate claims—claims made about the amount of greenhouse gasses emitted or avoided in the production, use and disposal of a product.
Consumers’ increasing education about environmental issues can be seen in the North American markets for voluntary carbon credits. Carbon credits represent a measurable and tradable reduction of greenhouse gas emissions from the atmosphere. In voluntary carbon credit markets, North American companies and individuals can voluntarily buy and sell carbon credits, These markets are active even though Canada and the United States haven’t set up a mandatory carbon trading scheme. As the markets for voluntary carbon credits mature, consumers are educating themselves and demanding higher quality carbon credits and third-party verification. Credit providers are responding.
Truth in Environmental Claims
A trip through stores across North America has changed a lot in the last couple of years. Products with claims like “New and Improved” and “Fast Acting” are rapidly ceding shelf-space to competitors that are labeled “Green”, “Natural” or “Carbon Neutral”. While businesses are trying to adapt to consumers’ growing environmental focus, these practices raise concerns about greenwashing. You aren’t alone if you’ve wondered, “Is it all just hype?”
The short answer is that not all environmental claims are hype, There are socially responsible companies offering superb environmentally conscious products. Unfortunately, there are also charlatans trying to make a quick buck off of consumers who want to do the right thing with their purchasing power.
The general rules on truth in advertising in Canada, which are contained in the Canadian Code of Advertising Standards, are clear: advertisers must be truthful about the claims they make to consumers. This includes environmental claims. Companies can follow these standards by making specific and accurate environmental claims that are supported with good evidence. Unfortunately, not all companies have taken this approach.
Ottawa-based marketing company TerraChoice Environmental Marketing has done a fantastic job of setting out common greenwashing tricks to look for.
TerraChoice’s “Seven Sins of Greenwashing”–an excellent set of categories to use if you want to evaluate environmental claims–-include
1) hidden trade-off – focusing on one green point at the expense of another (for example, a manufacturing process that emits only a small amount of greenhouse gas but uses a lot of bleach and solvents)
2) no proof – a claim you can’t easily verify
3) vagueness – a broad or misleading claim that isn’t as green as it sounds (for example mercury and arsenic are technically “natural”)
4) worshiping false labels – suggesting that a person or organization endorses the product when they don’t
5) irrelevance – a claim about some green aspect that had to be there by law anyway (such as no CFCs) or is unimportant because it applies to all of the products in that category
6) lesser of two evils – a claim that is true in comparison to other products in the same category, but risks distracting consumers from the broader environmental issues of using the product at all (like plastic water bottles that use 30% less plastic)
7) fibbing – false claims
The Greenwashing Index is another important development in eco marketing. The Greenwashing Index allows visitors to post, rate and discuss ads that make environmental marketing claims. Based on the votes of site users, the site assigns a score from “Authentic” to “Bogus.” Some of the comments that go along with the votes are well informed and can serve as a good place to start your research. Comments relating to an advertisement put out by the Malaysian Palm Oil Council, for example, link to a report by UK NGO Friends of the Earth on palm oil, a Forbes article on the commercial, and an Advertising Standards Authority complaint about the commercial in the UK. As with all open-access sites, though, you have to take comments with a grain of salt.
These sites encourage the single most important defense to bogus greenwashing claims: educated consumers, who can reward the legitimate companies and send the right message to the fraudsters.
Truth in Climate Claims
In North America, sellers of consumer goods aren’t required to report their carbon emissions on their packaging, so if a product has a label about carbon or carbon credits, it’s there voluntarily. But sellers of carbon credits or products advertised as low carbon still have to be honest about what they are selling.
The David Suzuki Foundation and the Pembina Institute put together a helpful report in 2009 called Purchasing Carbon Offsets: A Guide for Canadian Consumers, Business, and Organizations. The guide goes through things you should ask before buying an offset (which is a type of carbon credit) and then ranks a number of the big carbon credit sellers based on some important criteria, including auditing and permanence. Auditing means that a third-party checks that the carbon credits are legitimate, while permanence refers to whether a credit is just temporary, or results in a permanent removal of greenhouse gasses from the atmosphere (or avoided emissions). If this is an issue that interests you, you’ll find the full report, the executive summary, or this summary useful.
We’ve compiled the following list of issues to think about based on the Suzuki/Pembina report and our own experience dealing with carbon credits:
1) Can you do without or with less of the underlying product, such as airplane travel? (Conservation is the easiest way to reduce your GHG emissions).
2) If you see a “carbon neutral” claim, ask both yourself and the seller, what is carbon neutral about this product? Is it just the use of the product? What about the creation, maintenance and disposal of the product?
3) Who stands behind the carbon claim or credit? Is there a credible and independent 3rd-party verifying the claim? (Thankfully, this is becoming more common).
4) Does the seller have a system to make sure that the credits aren’t used more than once? Generally, sellers promise to retire credits, which means to list them as sold or used and to make sure they aren’t counted again.
5) Advanced: are the offsets made in accordance with one of the reputable independent standards such as the Gold Standard, CDM or VCS?
6) What type of project are the credits from? There are many ways to reduce carbon in the atmosphere and people have strongly different opinions about which ways are best (renewable energy, landfill gas recovery and forestry projects are some of the most common). On a gut level, are you comfortable with the type of project your purchase is supporting?
Newsflash: Zizzo Allan join the Jatro Greentech Inc. Team
July 20, 2010
Zizzo Allan Climate Law LLP is pleased to announce that it has been retained by Jatro Greentech Inc. It will provide strategic support in preparation for and access to potential funders and partners, legal and strategic inputs related to carbon finance and other pertinent matters.
Jatro Greentech Inc is a Canadian company with the mandate to participate in the low carbon and renewable energy economy. It is prepared to become one of the main players in the green energy sector, specifically focused on bio-diesel and alternatives to fossil fuel derived products. The company focuses on the development of jatropha curcas L, a non-food plant which can grow in marginal land. It’s mission is to become a leader in harvesting jatropha for green, renewable, sustainable energy and its derivative products without affecting food crop production.
For further information on Jatro Greentech Inc, please visit www.jatrogreentech.com or contact info@jatrogreentech.com
BC Clean Energy Act – BC’s Clean Energy Objectives
July 11, 2010
The dust has settled and the BC Clean Energy Act (the CEA) became law on June 3, 2010.
If the CEA is effectively implemented, BC is poised to give Ontario a run for its renewable energy money as the premier destination for renewable energy investment in Canada. The CEA is designed to change BC from a passive hydroelectric energy consumer to an active renewable energy exporter. While criticisms of the bill have emerged (relating to a lack of consultation, the reduction of the role of the BC Utilities Commission and the predicted cost to rate payers) no one can accuse the BC government of lacking vision.
In this post I want to look at the CEA’s statement of BC’s energy objectives.
You can read all of the objectives in Part 1 of the CEA [http://www.leg.bc.ca/39th2nd/1st_read/gov17-1.htm]. These objectives serve as a set of guiding principles for interpreting the rest of the CEA, as well as the regulations and policies that will flow from it.
Some of the most interesting objectives include
- Achieving energy self-sufficiency for BC
- Generating at least 93% of the electricity in BC through clean or renewable resources
- Ensuring that BC ratepayers get some of the most competitive rates charged by public utilities in North America
- Reducing BC’s greenhouse gas emissions (the following targets copied from the regulation):
- (i) by 2012 and for each subsequent calendar year to at least 6% less than the level of those emissions in 2007
- (ii) by 2016 and for each subsequent calendar year to at least 18% less than the level of those emissions in 2007
- (iii) by 2020 and for each subsequent calendar year to at least 33% less than the level of those emissions in 2007
- (iv) by 2050 and for each subsequent calendar year to at least 80% less than the level of those emissions in 2007
- (v) by such other amounts as determined under the Greenhouse Gas Reduction Targets Act
- To be a net electricity exporter
- To avoid using nuclear power
- To foster development of first nation and rural communities through the use and development of clean or renewable resources
The CEA also contains the expected goals of encouraging jobs, economic development, clean tech development and energy efficiency.
The first thing that stands out from a climate change perspective is the section setting out specific Greenhouse Gas (GHG) reduction targets. Two things to notice: first they are fixed targets unless they are modified by the Greenhouse Gas Reduction Targets Act (the GGRTA). This makes sense because the GGRTA is the primary instrument for dealing with BC’s GHG targets and it would be confusing (although sadly not unprecedented in the world of law) to have the targets listed in two places without an explicit indication of which set of rules takes priority. Second, section 35(d) of the CEA gives cabinet the authority to change BC’s energy objectives, with the exception of the objective covering GHG targets. This is important because it shores up the central authority of the GGRTA as the main source of GHG targets and, because it indicates the government’s commitment to the targets it has set. Note also that under the GGRTA, while some GHG targets are set by regulation, the big milestone reductions in 2020 and 2050 are set by the act itself (and thus require an amendment by the legislature to be changed). This is important because it means that any subsequent government would have to put a bill weakening BC’s GHG targets through the legislature, they couldn’t simply change the targets by regulation.
The big point to take from BC’s energy objectives is that, when you consider them together, they set out a relatively aggressive strategy to create an export industry in renewable energy for BC. This is different from Ontario, where the focus is primarily on satisfying Ontario’s own energy needs with increased renewable generation and conservation. An export approach makes sense if BC wants to make a large difference in Canada’s GHG emissions because BC uses far less energy than Ontario, and a far greater percentage of energy used in BC comes from hydroelectric generation. A 2003 Statscan survey of energy use in Canada shows that while BC consumed 992,240 Terajules of energy in 2003 Ontario consumed 3,291,711.
In addition to being important for reducing Canada’s overall GHG emissions, creating a renewable energy surplus (which you get if you combine energy self-sufficiency with exports) is important if BC wants to build a continentally competitive renewable energy sector. Creating a large market for renewable energy will allow it to take advantage of economies of scale in power generation and also hopefully spur entrepreneurs. Hopefully the demand that the BC government is creating through energy self-sufficiency and export programs will combine with the creation of a Feed-in tariff program (permitted under section 16 of the CEA) to really get investment started. If BC doesn’t set its generation targets high and provide price supports, renewable energy companies might not find it worthwhile to bother setting up shop in the province, particularly when Ontario has such generous price supports under the FIT Program.
The main criticism over the CEA relates to rate prices. It is interesting to note that the CEA includes an explicit objective to ensure that ratepayers “get some of the most effective rates charged by public utilities in North America.”
Marvin Shaffer, an economist at SFU criticized the CEA in a recent Vancouver Sun article on the grounds that it will unnecessarily cost ratepayers and taxpayers. He argues that BC Hydro’s obligations to buy electricity for self-sufficiency and insurance purposes may add over $1 billion dollars to BC Hydro’s costs (based on BC Hydro’s own estimates) because it will force the utility to enter into power supply agreements with renewable energy producers and contingency contracts in case of droughts (which could affect BC’s large hydroelectric water resources). In addition, he argues that there is not enough evidence to show that any financial returns on energy exports will be sufficient to compensate BC hydro for the services it provides and risks it assumes in the process of exporting.
Whether the CEA spurs a new era for BC as a clean energy power remains to be seen. Much of the CEA’s success will be determined not just by the act itself, but in light of how it is implemented by the provincial government and BC Hydro. In particular, the availability of renewable energy price supports under a Feed-in-Tariff or similar mechanism is going to be key in grabbing continent-wide attention and investment (as it was for Ontario). Here’s hoping.
Voluntary Carbon Market Still Standing in 2009
July 9, 2010
Despite 2009 being a stressful year for financial markets, voluntary carbon markets survived and in some cases thrived. Although the number and value of trades decreased from 2008 levels, there was a new emphasis on action in the United States. Many voluntary market participants transacted in anticipation of a future domestic compliance system. Although volumes and values were down, market development was evident as purchasers demanded more information about the origins of credits and compliance with third party standards. Interestingly, 2009 saw fewer purchases of voluntary credits in Europe and those purchasing these credits were more likely to retire them upon purchase.
These are findings of the recent report Building Bridges: State of the Voluntary Carbon Markets 2010, by Ecosystem Marketplace & Bloomberg New Energy Finance. This report is complied by various players and observers in the worldwide carbon markets based on voluntary reports of over 200 suppliers. It is designed to give a market-wide perspective on trading volumes, credit prices and project information.
Some trends discussed in this year’s report
- Average volume and price of credits decreased across the voluntary market in 2009
- Suppliers reported a decline in volumes traded by 26% although 2009 market volumes were still 39% above 2007 levels
- Preference of buyers to purchase specific offset credits, “over the counter” (OTC) versus standardized credits on registries (such as Carbon Financial Instruments (CFIs) traded on the Chicago Climate Exchange (CCX)). In fact, CCX credits saw significantly lower prices than OTC trades
- OTC average price declined by 12% from 2008 and CCX credits experienced a 73% drop in prices from 2008 levels
- Evidence of a maturing market, where buyers are focused increasingly on quality, accountability and specific project types
- Increased infrastructure development (protocols, registries, project types, accountability) and use of 3rdparty standards (90% adhered to standard)
- Great uncertainty about future compliance markets in 2009 affecting speculative purchasing
- Trading platforms for OTC credits becoming more popular
- Increased attention and trading of forestry credits, especially REDD (Reducing Emissions from Deforestation and Degradation) although the most popular forestry projects continued to be afforestation/reforestation by a small margin
- Methane destruction projects were the most popular project type, capturing 41% of the OTC market, where as Forestry accounted for 34% and renewable energy for 17%. In 2009 methane and forestry project roughly doubled at the expense of renewable energy
- The Voluntary Carbon Standard is clearly the 3rd party standard of choice, followed closely by the Gold Standard, the Climate Action Reserve and the Clean Development Mechanism
- Respondents were still bullish about the market, expecting significant growth through toe 2012 and beyond
Despite the potential, voluntary markets continue to remain a small fraction of the size of the regulated markets. We expect the carbon market to become increasingly important as more climate regulation is implemented in North America and for the voluntary markets to continue to play a tempered role in the overall carbon markets.
For more information please see the executive summary or the full report.
