Government to investigate ‘greenwashing’ in retail energy
As detailed in our alert in June 'greenwashing' is receiving increasing government scrutiny. The act of 'greenwashing' occurs whereby businesses make false or misleading claims regarding the environmental soundness of their product or service in an attempt to capitalise on the growing demand for environmentally sound products.
On 16 August 2021, Energy Minister Anne-Marie Trevelyan announced that the government will review how energy companies market 'green' electricity tariffs to consumers. The announcement is released amid on-going concerns that some energy companies are overstating how environmentally friendly their products are, with a poll showing that 75% of consumers believe suppliers should be more transparent over their 'green' tariffs.
9m British households are now on 'green' tariffs, with over half of all new electricity tariffs launched now marketed as ‘100% renewable’ or ‘green.' The government review aims to ensure that consumers signing up to a green tariff know where their energy is coming from and will explore the extent of ‘greenwashing’ in the retail energy sector, whether the current system is suitably transparent and whether the rules around what can be called a 'green' tariff remain fit for purpose.
Energy companies are currently able to advertise their tariffs as 'green' even if some of the energy they supply comes from fossil fuels. There are several ways to achieve the 'green' status under the current rules, including the energy companies committing to use 100% of the income from their customers to invest in developing renewable energy or by striking a deal with an existing windfarm or solar array to buy the electricity they produce. Under a government scheme, energy companies buy certificates known as Renewable Energy Guarantees of Origin (REGO) designed to show consumers how much of the electricity they sell has been acquired from clean sources.
The government review will explore whether the system surrounding REGOs needs to be smarter and whether suppliers need to provide clearer information to households about their 'green' tariffs, including the type of renewable energy used, and where and when the renewable power was generated.
In addition, the government has announced that it will publish a separate call for evidence on third-party intermediaries in the retail energy market, to include price comparison sites, auto-switching services, and non-domestic brokers. Despite approximately half of households using a third-party intermediary when engaging with the energy market, the third-parties currently operate outside of the retail market rules, and Ministers will seek views on whether a general regulatory framework is needed.
Consumer protection advocates and price comparison services have called for greater transparency around suppliers who market their tariffs as 'green.' Head of Regulation at Uswitch.com, Richard Neudegg added "More and more people are purchasing green tariffs but it’s been difficult for bill-payers to know exactly what’s under the hood of these deals. We support any measures that aim to demystify green tariffs for households."
If you have any questions or need advice following this latest update, please do not hesitate to contact our energy and regulatory advisors Mark Stockdale and Stephen Abram.
Date published: 25 August 2021