Is Greenwashing Illegal in Arkansas?

“Greenwashing” is “the act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service.”  Consider a disposable plastic water bottle which I have seen for sale at convenience stores throughout Little Rock.  The label reads something like, “This bottle contains 30% less plastic.”  Less plastic than what?  A nuclear reactor?  A glass bottle?  And, more importantly, does it contain 30% more plastic than it needs too?

This leads to the subject of this blog: is greenwashing illegal in Arkansas?

The answer, at least in some instances, is yes.

Here’s one reason why:

The Arkansas Deceptive Trade Practices Act prohibits a wide range sneaky, underhanded, and fraudulent behavior, including “knowingly making a false representation as to the characteristics, ingredients, uses, benefits, alterations, source, sponsorship, approval, or certification of goods or services or as to whether goods are original or new or of a particular standard, quality, grade, style, or model” and the use of “any deception, fraud, or false pretense” in connection with the sale or advertisement of any goods or services.

This, of course, is a fair description of greenwashing, reduced to its essence: a claim that a product or service is “green,” when, in fact it is not.

Thus, instances of greenwashing, if they are egregious enough and cause consumers monentary damage, will violate the ADTPA.  And violators should definitely beware: the Act provides for both civil and criminal liability, as well as for injunctive relief.

In future posts, I’ll examine some specific types of greenwashing, and some specific claims, against the Arkansas Deceptive Trade Practices Act, as well as some of the difficulties with seeking relief and proving a case under the ADTPA.  Stay tuned.

(Department of credit where credit is due: my definition of greenwashing is taken from one of several excellent websites hosted by environmental marketing group TerraChoice, The Sins of Greenwashing, found online at http://sinsofgreenwashing.org/.) 

(Department of citation: the sections of the ADTPA quoted above can be found at sections 4-88-107(a)(1) and 4-88-108(1) of the Arkansas Code.)

Arkansas Legislative Update: HB 1118 and Tax Credits for Sustainable Developers (Part II)

HB 1118 does present some practical concerns.  I’m most troubled by the fact that it does not provide for judicial review of decisions denying qualified project status, and makes no provision at all for review of whether an expenditure qualifies as a  “rehabilitation or development expenditure.”  This is not just because I’m a lawyer and stand to profit from another chance to go to court, but because if improvement districts do not come up with consistent, credible criteria for evaluating proposed qualified projects and apply those criteria fairly, we have a system susceptible to abuse and manipulation.

Second, is a tax credit of 20% of up to the first million in qualified investment enough to encourage significant development?  Consider that the Clinton Presidential Library, which holds a LEED Platinum certification, cost in excess of $125 million.  I recognize that the Clinton Library is not representative of the types of projects that we are most likely to see in a central business improvement district, but the fact is that in this day and age a million-dollar development is relatively small scale – particularly when you are talking about providing Class-A office, retail, and residential space while meeting the demands of historical preservation and some form of sustainable certification. 

HB 1118 also provides that “a taxpayer who receives an investment tax credit under this section shall not claim any other state or local tax credit or deduction based on the qualified rehabilitation or development expenditures except for the deduction for normal depreciation of the eligible central business improvement district property.”  I can envision some problems enforcing and applying this provision.  What if a developer purchases HVAC equipment that would normally be tax-exempt as the purchase of renewable resource equipment (see HB 1036/1037)?  Must the developer insist on paying the sales and use tax to preserve the tax credit? 

Last, as an advocate of sustainability, I note that HB 1118 is not, per se, a sustainalaw, since it treats green projects and non-green protects the same.  Why not fashion a law that rewards sustainable development?  The easiest way would be to provide for expedited consideration and increased tax credits for sustainable projects.

  

HB 1118 is headed for the House Committee on Revenue & Taxation.  Stay tuned!

Arkansas Legislative Update

Here’s an update on the current slate of proposed sustainalaws before the 88th General Assembly of the Arkansas Legislature:

HB1027 – The Sustainable Energy-Efficient Home Program. Referred to the Joint Committee on Energy.

HB 1036/1037 – Tax Credits and Exemptions for the Purchase of Renewable Resource Equipment. Referred to the House Committee on Revenue and Taxation and on agenda for consideration on January 25, 2011.

HB 1043 – The Reusable Shopping Bag Act. Referred to the House Committee on Public Health, Welfare, and Labor and on agenda for consideration on January 25, 2011.

HB 1050 – The Energy Efficiency and Conservation Financing Act. Referred to the Joint Committee on Energy.

HB 1118 - The Arkansas Central Business Improvement District Rehabilitation and Development Investment Tax Credit Act.  Referred to House Committee on Revenue and Taxation and on agenda for consideration on January 25, 2011.

The Arkansas SustainaBlawg will continue to track the progress of these bills. Stay tuned!

Arkansas Legislative Update: HB 1118 and Tax Credits for Sustainable Developers (Part I)

HB 1118 goes by the too-long title “Arkansas Central Business Improvement District Rehabilitation and Development Investment Tax Credit Act.”  While it is not a sustainalaw per se (it treats all projects the same), it is nonetheless an important addition to the slate of proposed sustainalaws before the Arkansas Legislature.

The proposed Act builds on the Central Business Improvement District Act (found at Ark. Code Ann. § 14-184-101 et seq.), which was designed to assist Arkansas cities in rescuing their deteriorating downtowns by empowering municipalities with more than 500 residents to create central business improvement districts.  (For an idea of a central business improvement district, envision the Main Street corridor in Little Rock or Cherry Street in Helena.)

The idea behind HB 1118 is simple: anyone who incurs costs and expenses in connection with a “qualified project” in a previously established central business improvement district is eligible for an income tax credit equal to 20% of up to the first million dollars of “qualified rehabilitation or development expenditures” on the project.  The tax credit would be available for five years, from January 1, 2012, to December 31, 2017, and, significantly, the credit may be sold, transferred, or assigned one time.

Lets unpack this a bit.  To be a “qualified project,” the property to be rehabilitated or developed must be located in the improvement district, must meet all applicable zoning and building codes, must meet any design and planning guidelines applicable the improvement district, and must involve “qualified rehabilitation or development expenditures” of more than $50,000.  The board of commissioners of the improvement district will decide whether a project is a “qualified project”.  Adverse decisions the board can be appealed to the “governing body of the municipality.”  (If HB 1118 passes, this is one spot where a lawyer will come in handy.)

 “Qualified rehabilitation or development expenditures” are defined by what they are not – namely, they are not the cost of acquiring the development property, any associated realtor’s fees, taxes, insurance, costs of landscaping, or sales and marketing costs.  Otherwise, “qualified rehabilitation or development expenditures” are, essentially, whatever the improvement district will approve.

If it passes, HB 1118 will give some financial teeth to the Central Business Improvement District.  Since that Act's passage, municipalities have been able to offer developers some incentives and special treatment to get them to to downtown projects, but not a $200,000 income tax credit that can be bought and sold.   

This is very reason HB 1118 would be important to the Arkansas sustainasphere as an important incentive to green builders and developers.  As shown by the currently ongoing revitalization and anticipated LEED-certification of the building located at 315 Main in Little Rock, the aging downtowns of Arkansas cities are loaded with dark and architecturally interesting but neglected buildings that can and should be rescued, repurposed, and greened. This program would empower Arkansas cities to offer a significant financial incentive that will make projects that once looked good only as sketches of sustainability look good on the balance sheet as well.

HB 1118 is not all green skies, of course, and in Part II I will address some practical concerns about the proposed Act.

Stay tuned!

LEEDIGATION UPDATE: Gifford v. USGBC

Back in October 2010, Henry Gifford and a few of his apparently like-minded friends launched a class-action assault on the U.S. Green Building Council’s “LEED” certification standard. Sustainabloggers from all over (including this one) quickly weighed in with their opinions on Gifford, the USGBC, the merits of the suit, and LEED.


So what has happened since the filing of the suit? Not much! The suit has fallen into the classic litigation mode of “hurry up and wait.” While the USGBC presumably denies Gifford’s allegations, they have yet to file an answer to the complaint.

And it will be at least three months before they do. This is because on January 4, 2011, the parties filed an interesting “stipulation to extend time” with the U.S. District Court for the Southern District of New York. The stipulation is short and sweet, and it basically says (1) that the Gifford plaintiffs have until February 7, 2011, to serve and file a First Amended Complaint, and (2) that the defendants have until April 6, 2011, to respond.

This is interesting because it is unusual for a plaintiff to amend their complaint before the defendant either answers or moves to dismiss, and without the benefit of any discovery. At the time he filed the Complaint, Gifford presumably felt that it stated claims upon which relief could be granted, made factual contentions with evidentiary support, and presented legal contentions warranted by existing law or a good faith argument for extending the law, and therefore passed muster. One is left to wonder what has changed. I can speculate – and this is nothing more than rank speculation of the first order – that Gifford’s attorneys received a strong signal that the complaint was fatally flawed and worked out a deal to buy some time to try to fix the problems. This would not be unusual, and, indeed, would be a sign of good lawyering.

And, at least to this sustainablawger, the complaint does have some serious deficiencies. For example, the complaint alleges antitrust allegations but makes no allegation as to the relevant product or geographic markets. This is a failure that, at least down here in the sleepy south, would warrant dismissal of that claim.

In any event, we will know in a little less of a month, and then we will get to hurry up and wait and see what the USGBC does. I fully expect them to move to dismiss the complaint. Which means we will get to hurry and wait some more and maybe, just maybe, by the end of summer the world at large will have an idea of where the case is headed.

So, hurry up and wait…but stay tuned!

Arkansas Legislative Update

The Arkansas Legislature is in session! Here’s an update on the current slate of green bills up for debate:


HB1027 – The Sustainable Energy-Efficient Home Program. Referred to the Joint Committee on Energy.

HB 1036/1037 – Tax Credits and Exemptions for the Purchase of Renewable Resource Equipment. Referred to the House Committee on Revenue and Taxation.

HB 1043 – The Reusable Shopping Bag Act. Referred to the House Committee on Public Health, Welfare, and Labor.

HB 1050 – The Energy Efficiency and Conservation Financing Act. Referred to the Joint Committee on Energy.

The Arkansas SustainaBlawg will continue to track the progress of these bills. Stay tuned!

The “Sustainable Energy-Efficient Home Program”

Lets take a look at one piece of proposed sustainable legislation before the 88th Session of the Arkansas Legislature: the “Sustainable Energy-Efficient Home Program” (HB 1027).

This ambitious legislation would change the face of residential development in Arkansas.  If passed, it would require the Arkansas Energy Office to develop comprehensive energy-efficiency guidelines for new residential construction and for major renovations of existing homes. 

The key parts of Program are:

First, new construction and major home renovations shall be certified to at least 10% reduction below the baseline energy consumption determined in accordance with the Performance Rating Method of Appendix G of the American Society of Heating, Refrigerating and Air-Conditioning Engineers, Standard 90.1-2007.  The requirement would apply to all projects that had not entered the “schematic design phase” as of the effective date of the Program; and,

Second, in addition to the 10% reduction in energy consumption, new construction projects would also be required to “be designed and constructed” to use at least 20% less indoor water “than the indoor water use baseline calculated for the home after satisfying the fixture performance requirement, if any, under the Arkansas Plumbing Code.”  Outdoor water use must be at least 50% “of the water that would have been consumed otherwise.” 

The Program also requires the Arkansas Energy Office to develop and issue policies and technical guidelines to establish procedures and methods for compliance with the Program.

Like I said, this is an ambitious piece of sustainalaw.  The recognition that energy efficiency and sustainability in housing can be managed on a statewide basis is a step forward.  New home construction in Arkansas has been at best flat for the last 18 to 24 months, but the economy is loosening up and I expect that in 2011 folks are going to start building homes again, which makes the timing right. 

Something else that is innovative about the Program: while it recognizes that homes can be made more energy-efficient and sustainable if they are built according to a set of recognized standards, the Program runs counter to the current trend of relying on the USGBC’s LEED criteria.  This is a good thing, as it is well established that the LEED criteria was never intended to be a building code.

But the proposed legislation also contains some significant shortcomings.  First and foremost, HB 1027 contains no funding mechanism.  How, exactly, is the Arkansas Energy Office going to administer the Program, develop standards, technical guidelines, and performance criteria, and police compliance with the Program without any additional funding?  We all know the answer.

Another problem: the Program imposes a one-year monitoring requirement.  If after a year the home has failed to perform as required, the designer, homeowner, contractor, contract manager at risk, and commissioning agent shall investigate and determine the cause for the performance shortcomings and recommend corrections or modifications necessary for the home to meet the Program’s performance standards. 

This is necessary, as simply requiring a home to be built to conserve energy is no guarantee that the conservation will actually occur.  But the Program lacks a real enforcement mechanism.  The legislation does not actually require modifications to be made.  Nor does it assign financial responsibility (or, alternatively, give financial rewards) for bring the home into compliance.  Thus, while the language of HB 1027 says “mandatory,” the spirit and the reality of the bill is “comply if you can afford to and feel like complying.” 

And then there is a more esoteric problem: increases in energy efficiency are just as likely to result in increases as in decreases in energy use.  (For an interesting article on this point, read “The Efficiency Dilemma” in the December 20 and 27, 2010, issue of the New Yorker.)

These shortcomings could be fatal.  Thus, I can’t help but think that the Program, if passed in its current form, is poised to be little more than a paper tiger – unfunded, without adequate compliance and enforcement mechanism, and perhaps a bit off target.  After all, is HB 1027 a Program, or merely an aspirational statement?  It’s an important distinction.

The Arkansas Legislature opens for business this coming Tuesday, January 11, 2011.  Stay tuned.

Arkansas Legislative Update: Sustainability Bills Before the 2011 Arkansas Legislature

The 88th General Assembly of the Arkansas Legislature convenes on January 10, 2011.  While the dominant characteristic of the 2011 session is that it contains the largest incoming class of legislators in the State’s history, the 2011 Arkansas Legislature will also consider several pieces of legislation with the potential to significantly impact the Arkansas sustainasphere.

HB 1027: The Sustainable Energy-Efficient House Program.  This ambitious bill is designed to promote energy conservation in private residents.  It proposes to set green energy efficiency standards for all new residential construction, and for “major renovations” to existing homes.  The cornerstone requirement of the bill is that all new construction and major home construction shall be certified by the Arkansas Energy Office to show at least a ten percent reduction below the baseline energy consumption.

HB 1050: The Energy Efficiency and Conservation Financing Act.  This bill would allow electricity and natural gas providers to finance energy efficiency improvements to private residences and rental properties.  If it passes, residential consumers finance a wide variety of “energy efficiency and conservation measures” with a long-term, low-interest loan from their electricity or natural gas provider.  Eligible improvements include insulation systems, storm doors and windows, HVAC modification or replacement, and the installation of solar- and wind-powered systems.  Energy audits are also covered. Notably, consumers could arrange to repay loans received through an additional charge on their utilities bills, and repayment obligations stay with the improved property, not the consumer.

HB 1036 and 1037: Tax Exemptions and Credits for Purchases of “Renewable Resource Equipment."  This bill tandem would give make purchases of “renewable resource equipment” exempt from sales and use tax, and would give purchasers a tax credit of 20% of the purchase price against the purchaser’s income tax.  “Renewable Resource Equipment” is defined as “a system, component of a system, mechanism or series of mechanisms, support service, or a combination of these items that use a renewable resource as a source of energy or that offset or replace the consumption of a traditional energy source, including without limitation, electricity or natural gas.”

HB 1043: The Reusable Shopping Bag Act.  This bill would require most supermarkets and similar retailers to stop using plastic shopping bags.  See my previous post on this bill, "Will Arkansas Ban Plastic Shopping Bags" (December 6, 2010). 

Viewed together, it is difficult to consider these five pieces of proposed law as much of a sustainable legislative package.  But these bills are all in the very earliest stages of legislative gestation.  They are all flawed for various reasons, but they also all have the potential to drive interesting and significant innovation in the Arkansas sustainasphere.  I will be tracking these, and similar bills, as the legislative session progresses.  Stay tuned.