Department for Environment, Food and Rural Affairs
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Green tariffs: check what yours delivers
The Department for Environment, Food and Rural Affairs (Defra) is today advising how consumers and businesses can establish what benefits their green electricity tariff delivers above and beyond the supplier's existing legal obligation to provide electricity from renewable sources.
Environment Secretary Hilary Benn said:
"I want to make sure that the green tariff market, which has grown rapidly over recent years, is clear for consumers and businesses about the precise benefit their tariff brings.
"Many energy suppliers offer green tariffs to businesses and domestic customers who want to make a contribution to environmental projects or help tackle climate change, but these differ in what they deliver."
To help make the situation clearer, Mr Benn has:
* asked Ofgem to provide detailed guidelines for suppliers of green tariffs with a view to developing a rating system that will distinguish between the different environmental potential of green tariffs;
* written to the Chief Executives of energy suppliers to ask them to provide the clearest possible information about the benefit their green tariff brings for the environment; and
* announced that Defra will change its guidance on corporate reporting so that it reflects the latest evidence on the benefits of green tariffs.
He said:
"This market is changing rapidly, partly because we have committed to the largest expansion of renewable electricity in our history. We will shortly be consulting on a range of measures that will encourage energy suppliers to increase their investment in renewable energy.
"I want to be sure that people and businesses who buy green tariffs have clear information about what environmental benefits they are getting linked to renewable electricity and whether this is in addition to that which energy suppliers must provide anyway. As with any product in the marketplace, we need to know what we are paying for, particularly as in some cases, choosing the tariff may cost more."
Defra's Best Practice Voluntary Reporting Guidelines advise business on how they should calculate their emissions from their energy use. When the guidelines were produced in 2005, the department advised that green tariff electricity could be reported as zero emissions, with the intention that increased demand for renewable energy would draw through increased supply.
Mr Benn added:
"It is increasingly difficult to demonstrate that buying a renewable electricity tariff is offering additional carbon emissions reductions compared with what suppliers are required to source to meet the Renewables Obligation. It is now clear that businesses signed up to green tariffs based on the evidence available at the time but their choices have been producing only limited additional renewable generation capacity. This also means individuals opting for green tariffs may not have been generating the environmental benefits they anticipated their actions would encourage.
"I have therefore decided that we will change the voluntary corporate reporting guidelines to bring them into line with current best practice and provide coherent carbon accounting. This will mean that for the reporting year 2008-9, best practice is expected to be for businesses to use a grid average rate - average rate of carbon emissions associated with electricity transmitted on the national grid - unless their supplier can prove the carbon benefits are additional. This is to reflect the existing evidence that the additional carbon benefit of green tariffs is not transparent. However, we do recognise that some existing and future green tariffs may well deliver broader environmental benefits and we will consult on how these benefits should be treated."
In support of Defra's announcement The Carbon Trust has issued specific guidance to business on the issue of green tariffs. Tom Delay, Chief Executive of The Carbon Trust said:
"We strongly support the move made by Defra today as the green tariffs market currently lacks transparency, delivers minimal additional carbon savings and suffers from significant double counting problems. Renewable power is key to delivering the UK's carbon reduction targets. However, a coordinated approach is required to ensure that green tariffs deliver genuine carbon reductions and that the benefits of renewables can be accurately reported by businesses towards their carbon reduction targets"
Ofgem Chief Executive, Alistair Buchanan, said:
"Ofgem is eager to clear up the confusion among consumers over green tariffs. We have worked for some time on revising our guidelines on how suppliers should market their green tariffs and last November we proposed an accreditation system that will make clear which tariffs offer real environmental benefits.
"We have since worked on a revision of the proposal based on consultation with stakeholders on the complex issues surrounding green tariffs and we intend to publish a revised accreditation scheme proposal in July, consistent with Defra's position on carbon reporting."
The expansion of the green tariffs market reflects the fact that more and more people want their energy use to have benefits for the environment. This growth in green tariffs has sent a clear signal to energy suppliers that people want them to do more on the environment, and promote renewables. It has also supported the Government in mandating energy companies to produce an ever greater share of renewable energy.
Notes to editors:
1. Some existing green tariffs may well deliver broader environmental benefits. Following the publication of Ofgem's guidance to suppliers later this year, Defra will consult on how any broader environmental benefits, possible long term carbon benefits and any genuinely additional carbon benefits of green tariffs could be treated in its voluntary reporting guidelines.
2. Tariffs from different suppliers can offer electricity produced from renewable sources, electricity from low carbon sources such as combined heat and power, carbon offsets from accredited schemes or wider environmental benefits such as planting trees.
3. The revised Defra Greenhouse Gas Conversation Factors, including the guidance on the treatment of green tariffs can be found at: http://www.defra.gov.uk/environment/business/envrp/conversion-factors.htm
4. In 2005, Defra produced 22 Environmental Key Performance Indicators to help businesses address their most significant environmental impacts, and report on them. Many companies use the guidelines to help produce their voluntary Corporate Social Responsibility reports.
5. One of the KPIs covers greenhouse gas emissions. This is supported by conversion factors, provided by Defra, that help companies convert their energy use, for example from electricity or air travel into greenhouse gas emissions. The conversion factors have since 2005 suggested that companies could convert the emissions from the purchase of green tariff electricity as zero emissions.
6. The way that the conversion factors recommend companies treat green tariffs will now be changed to say that:
* For reports for the reporting year 2007-8 - if organisations have used a zero rate, they should, where practicable, include a footnote to explain that they are using a green tariff.
* For the reporting year 2008-9, the guidance will outline that Government expects that for most green tariffs, businesses use a grid average rate to reflect the existing evidence that the additional carbon benefit of green tariffs is limited.
7. Ofgem will consult on their proposals for revised guidance to suppliers on green tariffs next month for conclusion in the Autumn.
8. Following this, Defra will consult on how any broader environmental benefits, possible long term carbon benefits and any genuinely additional carbon benefits of green tariffs could be treated in the Defra voluntary reporting guidelines.
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