Previous posts, e.g., here and here, discussed fraudulent biofuels credits schemes in which companies falsely claim to produce biofuels and sell fake credits on the Renewable Identification Numbers (RINs) market.

A RIN is a numeric code generated by a renewable fuel producer or importer that represents a gallon of renewable fuel, and certain “obligated parties” in the fuel industry and related businesses can acquire RINs as a way to comply with the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard Program.

There have been a number of such schemes exposed over the last few years, and some of the individuals perpetrating them prosecuted and punished.

Two such individuals were recently sentenced to long prison terms (121 months and 135 months) for their roles in a multi-state scheme sell fraudulent biofuel credits and fraudulently claim tax credits.

The story, the general parameters of which are sadly familiar to us by now, is that the two men operated shell companies purporting to purchase renewable fuel produced by a co-conspirator companies, on which credits had already been claimed and were not eligible for additional credits.  By a series of false transactions, they transformed the fuel back into feedstock for fuel production and sold it back to the co-conspirator companies, allowing credits to be claimed again.

One of the federal prosecutors who prosecuted the case called the sentence “just punishment” for crimes that “defrauded and undermined a federal program intended to further the energy independence of our nation.”

An Environmental Protection Agencey (EPA) official involved said the agency is “committed to eliminating fraud in the renewable fuels market” and “will continue to hold criminals accountable.”

Indeed, the EPA has promulgated additional regulations to ensure oversight of RIN generation and improve the RIN market and has teamed up with the Commodities Futures Trading Commission in an attempt to improve regulation and enforcement of RINs and renewable fuels markets.

The Justice Department press release can be found here.

The U.S. Federal Trade Commission (FTC) has been very active in combating greenwashers, those advertisers and marketers of green products and services that make false or deceptive claims of environmental benefits.

America’s consumer watchdog agency has addressed greenwashing in two ways.   First, the agency has attempted to preempt it through guidance to advertisers in its Guides for the Use of Environmental Marketing Claims, commonly know as the Green Guides, which provide a framework for green marketers to formulate permissible environmental benefit claims for products and services.

Second, the FTC has undertaken a number of enforcement actions against greenwashers, including against an LED manufacturer for misleading environmental benefit claims and a recent lawsuit against Volkswagen on behalf of consumers.

In a recent piece published on Law360, three attorneys from the WilmerHale law firm wrote that the FTC appears poised to take a more active role in the area of rooftop solar installations.

A workshop held by the FTC in June examined consumer protection issues in the rooftop solar industry, which operates amid a “complex matrix of laws, regulations, policies, subsidies and incentives.”

According to the article, the FTC believes it has the expertise to protect consumers of rooftop solar installations:

The FTC has taken the position that it is “uniquely positioned” to ensure that “consumers are well-informed about its pros and cons and the options available to them” regarding rooftop solar generation.

The agency, of course, has the authority to target deceptive advertising, and it noted at the workshop that the Green Guides are applicable to the marketing of rooftop solar installations.

Furthermore, the FTC has issued “Solar Power for Your Home” guidance for consumers and recently opened an enforcement action relating to allegedly illegal robocalls for solar marketing.

While a number of state officials believe primary regulatory responsibility for the rooftop solar industry should be on the state level, the article said, they recognize that the FTC could play a role in identifying best practices and consumer communication templates.

So we can expect to see more from the FTC to keep greenwashing in check as the rooftop solar industry expands.

It’s hard to keep track of all of the developments in the Volkswagen emissions greenwashing scandal, and there’s much to catch up on.

First, the German automaker worked out the framework for potential settlement of a lawsuit with the U.S. Department of Justice (DOJ), which filed a civil complaint against Volkswagen in January seeking injunctive relief and monetary penalties for VW’s actions.

The reconciliation happened rather quickly, with VW proposing to settle the case about three months after the suit was filed.  Apparently, VW was eager to move past the scandal and has admitted tried to cheat on the emissions tests.

The parties have already reached an agreement in principle.  As part of the settlement, VW has offered to repair 482,000 diesel vehicles with the defeat device software or buy back or cancel the leases on the vehicles.  The automaker will also set up environmental and consumer protection funds.

The court set a date of June 21st for VW and the DOJ to finalize the settlement agreement and recently confirmed the parties are on track to meet that deadline.

While this particular action may be resolved shortly VW is still fighting other battles, some pertaining to the scandal, others involving different issues.

For example, three VW dealers sued the automaker in a proposed class action saying the company intentionally defrauded dealers by installing the software.

VW is also facing an investigation by the U.S. International Trade Commission (ITC) for patent infringement.  The ITC voted to initiate the investigation at the request of hybrid vehicle technology company Paice.

The investigation centers on alleged infringement of U.S. Patent Nos. 7,237,634, 7,104,347, and 8,214,097.  The three related patents are entitled “Hybrid vehicles” and cover hybrid electric vehicles utilizing an internal combustion engine with series parallel electric motors, regenerative braking, and control circuitry.

The accused products listed in the complaint are the VW Jetta Hybrid, the Audi Q5 Hybrid, the Audi A3 e-tron Hybrid, the Porsche S E-Hybrid, and the Porsche Panamera S E-Hybrid.

The Paice complaint requests a permanent limited exclusion order that would stop the allegedly infringing hybrid vehicles and components from entering the United States.

Two recent greenwashing decisions in the United States and Europe highlight the various (sometimes overlapping) organizations involved in combating false or misleading green advertising claims.

In the U.S., the National Advertising Division (NAD) of the Better Business Bureau (BBB) recently examined environmental benefit and performance claims made in connection with “Eco Alkalines” batteries.

The manufacturer, LEI Electronics (LEI), agreed to most of the NAD’s recommendations including discontinuing certain advertising and modifying most of its environmental claims.

However, LEI pushed back against the NAD on LEI’s carbon neutrality claim, so the NAD referred that claim to the Federal Trade Commission (FTC) for review (see the BBB announcement here and the Lexology article here).

The statements that remain in dispute are:

[E]very purchase is carbon neutral….by purchasing Eco Alkalines batteries, you’re doing your part to reduce the CO2 and climate change impact brought about by the production, distribution, and disposal of alkaline batteries.

[The product is a] 100% carbon neutral alkaline battery.

In Europe, the Lauterkeitskommission, the self-governing body of the Swiss commercial communications industry, found that certain claims made by the Swiss Gas Association (SGA, known as erdgas) regarding natural gas were insufficiently supported by evidence (see article here).

The disputed claims included the following statements:

Natural gas pollutes the environment less than oil, wood chips, pellets and coal power.

The most effective climate protection is to replace oil with natural gas.

Nature thanks you for purchasing a new natural gas heating.

The Lauterkeitskommission noted that the advertiser bears the burden of proving the truth of factual statements made in advertising.  It held that environmental superiority over competitors can be claimed only when the advertiser can demonstrate a significant advantage.

As to the SGA’s first claim, the Lauterkeitskommission held that the SGA’s evidence was insufficient to prove the superiority of gas over wood chips or pellets. The second claim was not sufficiently proven because, while natural gas may be superior to oil, there are other more environmentally beneficial heating systems.

The last claim was held to be permissible because it is “evident” that a new heating system would be superior to an old heating system.

While we’re used to the FTC and other national consumer watchdog agencies being involved in combating greenwashers, these investigations and decisions remind us that anti-greenwashing activity comes from many different types of organizations.

Previous posts (e.g., here, here, here, and here) have covered a rash of fraudulent biofuels credits schemes in which companies falsely claim to produce biofuels and sell fake credits on the Renewable Identification Numbers (RINs) market.

A RIN is a numeric code generated by a renewable fuel producer or importer that represents a gallon of renewable fuel, and certain “obligated parties” in the fuel industry and related businesses can acquire RINs as a way to comply with the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard Program.

There have been a number of such schemes exposed over the last few years, and some of the individuals perpetrating them prosecuted and punished.

According to a spokesman for a biodiesel trade group quoted in this StarTribune article, the RIN scams have hurt the biofuels industry by making obligated parties more wary of purchasing the credits from biodiesel producers.

The EPA has been taking steps to mitigate this problem, including in 2014 promulgating additional regulations to ensure oversight of RIN generation and improve the RIN market (see the story here on Biofuels Digest).

Now the EPA is teaming with the Commodities Futures Trading Commission (CFTC) in an attempt to improve regulation and enforcement of RINs and renewable fuels markets.  The two agencies recently entered into a Memorandum of Understanding (MOU) to share information and provide inter-agency advice.

In particular, the EPA will share its information on RINs and renewable fuels markets while the CFTC will advise the EPA on oversight and enforcement to reduce fraud:

The Parties intend to coordinate, cooperate and share information . . . in the possession of the EPA with regard to the RIN and renewable fuels markets in connection with the respective regulatory and enforcement responsibilities of the Parties. . . .The CFTC . . . will use the information to advise EPA on techniques that could be employed to minimize fraud, market abuses or other violations, and to conduct appropriate oversight in RIN and renewable fuel markets to aid EPA in successfully fulfilling the EPA’s statutory functions under [the] Clean Air Act . . .”

Let’s hope this inter-agency cooperation will succeed in reducing biofuels credits greenwashing.

Previous posts (here and here) discussed the Volkswagen emissions scandal in which the German automaker intentionally programmed a number of its diesel vehicles to activate emissions controls only during testing.

The vehicles’ software allowed the nitrogen oxide (NOx) output to satisfy U.S. emissions standards during testing while producing much higher emissions during actual driving conditions.

A few months ago, the U.S. Department of Justice (DOJ) filed a civil complaint against Volkswagen seeking injunctive relief and monetary penalties for the German automaker’s actions.  That lawsuit was filed at the request of the U.S. Environmental Protection Agency (EPA) and focused on the deception around the government testing.

Recently, the Federal Trade Commission (FTC), the U.S. government’s consumer protection and competition watchdog, sued Volkswagen on behalf of American consumers for false advertising in connection with the emissions scandal.  According to the complaint, the FTC brought this action:

…in connection with Defendant’s false advertising that its “Clean Diesel” vehicles had low emissions, complied with state and federal emissions standards, were environmentally friendly, and retained a high resale value.

The complaint details VW’s extensive advertising campaign directed at “progressive and “environmentally-conscious” consumers touting “diesel’s environmental and economic advantages.”  This advertising including a Super Bowl ad and other nationally-televised spots, a social media campaign, print advertising,and other marketing statements such as:

• print advertising including the slogan “Diesel – It’s No Longer A Dirty Word”
• a 2009 promotional mailer claiming the Jetta TDI Clean Diesel engine is “designed to reduce emissions”
• a press release for the 2014 Touareg stating that the “deNOx diesel converter . . . helps reduce NOx emissions by up to 90 per cent”

The FTC alleges that VW’s marketing strategy materials indicated that one of the “key messages” it intended to convey through the word “clean” was that its “Clean Diesel” vehicles produce “NOx emissions [that are] reduced by 95 percent[.]”

Furthermore, according to the complaint, VW’s advertisements and marketing materials also falsely claimed that its vehicles complied with state and federal emissions standards.  Some of those materials included statements such as “Clean Diesel” vehicles “meet the strictest EPA standards in the U.S.”

Additional advertising claims at issue included statements that the vehicles are “environmentally-conscious,” “eco-conscious,” or “green” and that the “Clean Diesel” vehicles would have a higher resale value than comparable gasoline vehicles.

Among other causes of action, the FTC alleges that these and other advertising and marketing statements constitute unfair or deceptive practices in violation of Section 5(a) of the FTC Act that have caused substantial injury to consumers, who have “spent billions purchasing or leasing” VW vehicles.

The FTC is requesting that the court enter a permanent injunction to prevent future violations and other equitable relief to refund the monies paid by consumers for the vehicles at issue.

In addition to the feds, the states are starting to get involved as well.  The attorney general of Kentucky filed a similar false advertising lawsuit against VW, alleging violations of the state’s Consumer Protection Act (see story here).

A previous post discussed the Volkswagen emissions scandal in the context of other greenwashing cases and noted that it may exemplify a new trend of high-tech greenwashing.

Last year, Volkswagen admitted that it had intentionally programmed a number of its diesel vehicles to activate emissions controls only during testing.  The vehicles’ software allowed the nitrogen oxide (NOx) output to satisfy U.S. emissions standards during testing while producing much higher emissions during actual driving conditions.

Recently, the U.S. Department of Justice (DOJ) filed a civil complaint against Volkswagen seeking injunctive relief and monetary penalties for the German automaker’s actions.  The complaint also names Audi and Porsche as defendants.

Filed in U.S. District Court for the Eastern District of Michigan at the request of the U.S. Environmental Protection Agency (EPA), the complaint alleges that the deceptions and emissions violate certain provisions of the Clean Air Act (CAA) pertaining to NOx emissions and testing procedures.

Those provisions, and related regulations, require car manufacturers to obtain certification to sell cars in the United States.  As part of the certification process, the manufacturers need to disclose and justify any auxiliary emissions control device (AECD) and explain why it is not a “defeat device” that reduces emission controls under normal operating conditions.

The DOJ alleges that in the testing of a number of cars (the “2.0L Subject Vehicles” and the “3.0L Subject Vehicles”) the defendants failed to disclose the software (the “electronic control module” or “ECM”) which activated the emissions controls during testing, and that the ECM is an AECD.

Paragraph 69 of the complaint describes the software for one set of vehicles and what it does during EPA emissions tests:

During FTP emission testing, the 2.0L Subject Vehicles’ ECM run software logic and/or calibrations that produce compliant emission results under an ECM calibration that VW referred to as the “dyno calibration” (referring to the equipment used in emissions testing, called a dynamometer).  At all other times during normal vehicle operation, the 2.0L Subject Vehicles’ ECM software run a separate “road calibration” that reduces the effectiveness of the emission control system.  In other words, the 2.0L Subject Vehicles ECM software tracks the parameters of the FTP and causes emission control systems to underperform (or fail to perform) when the software determines that the vehicle is not undergoing the FTP.

The complaint alleges that Volkswagen knowingly concealed facts  that would have revealed the existence of the methods performed by the software.

The claims include selling vehicles that don’t comply with CAA emissions requirements, tampering with the vehicles during testing, and certain EPA reporting violations.

The DOJ is seeking an injunction that would prohibit the defendants from selling any vehicles in the United States that fail to comply with the EPA’s emissions certification requirements.  In addition, the feds have asked the court to prohibit the defendants from selling vehicles equipped with any non-compliant AECD or defeat device.

The complaint also requests that civil penalties be imposed in the form of fines of up to $37,500 per vehicle for each violation of the CAA.

Based on an EPA official quoted in this article published by Biodiesel Magazine, it sounds like the feds were not getting the remedial steps they wanted out of Volkswagen (“So far, recall discussions with the company have not produced an acceptable way forward.”).  Seems this lawsuit was filed to put more pressure on the automakers.

By now the Volkswagen emissions scandal has been widely reported and analyzed, and the consequences the German carmaker will face for using software to cheat on emissions tests will be determined, at least in part, by a mass of lawyers.

What interests me is how Volkswagen’s actions fit into the broader context of greenwashing.

The U.S. Environmental Protection Agency found that Volkswagen intentionally programmed a number of its diesel vehicles to activate emissions controls only during testing.  The vehicles’ software allowed the nitrogen oxide (NOx) output to satisfy U.S. emissions standards during testing while producing much higher emissions during actual driving conditions.

In one sense, this comports with a theme we’ve encountered before in greenwashing, i.e., a product’s real-world performance does not live up to its testing results.

The most common example is the charge that a car’s actual gas mileage is considerably lower than the EPA’s fuel efficiency estimates.  These allegations have been made against Ford, Toyota, and Honda (see previous posts here, here, and here).

A variation on this theme is the allegation that the testing protocols themselves are flawed, e.g., in lawsuits against Hyundai and Kia about supposedly overstated fuel economy figures due to testing methods that were not compliant with EPA requirements.

But just as troubling as the result of the deception (actual NOx output being considerably greater than the tested output) is Volkswagen’s method of deception.

This seems be part of a new trend of technological greenwashing.  Rather than making false or misleading statements in ads and other marketing materials, or providing express statements of inflated numbers, this new form of greenwashing uses technology to deceive.

We’ve seen technological greenwashing at least once before in a lawsuit accusing Ford of claiming that a software update for the Fusion Hybrid would increase performance and mileage (see previous post here).  According to the plaintiff, the car’s monitor displayed better mileage and less gas usage after the upgrade but the numbers were inaccurate and the vehicle’s actual mileage did not improve.

This Volkswagen high-tech greenwash is more insidious because the entire deception is cloaked in technology; there isn’t even an affirmative misleading display as in the Ford case, so government agencies and consumers might have no idea there are any representations being made.

This probably is not the last we’ll see of the high-tech greenwash.

The Federal Trade Commission (FTC), America’s consumer watchdog agency, has historically been ahead of the curve on greenwashing.

In 1992, it first published its Guides for the Use of Environmental Marketing Claims, commonly know as the Green Guides, which provide a framework for green marketers to formulate permissible environmental benefit claims for products and services.

Since then, the agency has been actively pursuing greenwashers, with an aggressive campaign in the 1990s against deceptive environmental marketing claims including enforcement actions targeting ads for plastic grocery bags, aerosol cleaning and beauty products, packaging and tableware products, laundry detergents, and disposable diapers.

More recently, the FTC has occasionally taken alleged greenwashers to court; it brought a recent action for misleading environmental benefit claims against an LED manufacturer.

So it comes as no surprise that the agency would be proactive in the area of green certification seals.  Recently, the FTC sent warning letters to five providers of such seals and 32 businesses using those seals.

Certification seals, or marks, are a special species of trademark.  Unlike ordinary trademarks, which indicate the commercial source of a product, certification marks communicate to the consumer that the products to which they are affixed meet certain manufacturing or quality standards.

Examples of popular certification marks are the LEED certification, owned by the U.S. Green Building Council and Energy Star, owned by the U.S. Environmental Protection Agency:

This preemptive move consisted of the letters, which alerted the providers and businesses that the certification seals at issue could be considered deceptive and may not comply with the Green Guides.

The FTC announced the warning letters last month, but noted that it was not conducting any enforcement actions at this time.  The FTC did not disclose the names of the companies to which it sent the letters.

The press release provides examples of two hypothetical green seals, potentially deceptive on the right and not deceptive on the left:

The press release also mentions the agency’s new blog, Performing Seals, which helps marketers understand how certification seals can comply with the Green Guides.

It was just a few months ago that a blog post reported a criminal defendant pleaded guilty to selling fraudulent renewable identification numbers (RINs).

It has happened again, with recent prison sentences for four individuals in Florida who also pleaded guilty to charges related to a scheme involving false production of biodiesel RINs.

According to this article in a Florida online newspaper, court documents had accused the defendants of profiting by unjustly generating and selling RINs and unjustly claiming biodiesel tax credits for the production and blending of fuel that was not actually biodiesel.

More particularly, as employees and officers of New Energy Fuels LLC, the defendants claimed to process animal fats and vegetable oils into biodiesel.  However, what they actually did was perform minimal processing on low-grade feedstocks to produce a low-grade fuel that was not biodiesel.

They would represent to the U.S. Environmental Protection Agency (EPA) that they had produced biodiesel, generate fraudulent biodiesel RINs, and sell the fake RINs to third parties.  In total, the defendants sold over $15 million in fraudulent RINs.

The defendants also made false claims to the Internal Revenue Service (IRS) to get biodiesel tax credits.

As I’ve said before, I believe this type of fraudulent activity is greenwashing.  The fraud and resulting damage are recognizable when we view the putative RIN purchasers as green consumers, albeit commercial consumers instead of individuals, falling victim to false representations about the validity of renewable energy-based financial products.

The Acting Special Agent of the EPA in charge of the investigation (together with officials from the Dep’t of Justice and IRS echoed this sentiment, speaking to the purpose of RINs and the consequences of such fraudulent activity:

“The Renewable Fuel Standard helps reduce the climate impact of transportation fuel sold in this country.  The criminal activity by these defendants has real consequences.  The defendants manipulated and utilized federal governmental programs to line their pockets by fraud….Companies and managers need to understand there are serious consequences to skirting the rules and undermining the integrity of an EPA program.”