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Ofgem has proposed two separate sets of guidelines: one to cover tariffs for energy produced from renewable sources and another to cover tariffs for energy sources that have low carbon dioxide emissions. Ofgem's aim is to improve the information available so customers can make informed choices.

Under the proposed new voluntary guidelines, low carbon offerings will be rated according to how low their associated carbon emissions are – their carbon intensity. The proposed A to F rating system will be similar to the system currently used for rating the efficiency of household appliances. All suppliers' tariffs will be rated according to carbon intensity so customers can choose a low carbon energy supply.

Ofgem's Chief Executive Alistair Buchanan said:
"By cutting green confusion we are giving consumers more confidence when shopping around for an electricity deal to help cut their carbon footprint.

"Currently, customers find it difficult to compare the environmental benefits of the various energy deals on offer. The new rating scheme will eliminate confusion and encourage customers to seek deals that best meet their needs, and will give suppliers more incentives to innovate and develop new tariffs and products."

Karen Darby, founder of the price comparison service, SimplySwitch.com, commented:
"Green energy is really a grey area at the moment, so we welcome any move that makes it easier for the public to understand. Lots of energy companies play the 'green card' when trying to win customers. An independent rating system is exactly what's needed to give consumers a more objective view.

"While Britons are very aware of green issues, recent research by SimplySwitch.com shows that 'green attitudes' aren't yet translating into action when it comes to choosing energy providers. While over two thirds of Britons claim that being 'green' is important, only 16% even consider switching to a green energy tariff. Price remains the biggest motivator for switching energy suppliers, with 'customer service' in second place.

"The Government has stringent renewable energy targets for power companies. However, until demand for green energy rises above these levels, environmentally friendly tariffs won't come to the foreground. At the moment, price motivates Britain more than 'greenness', so it would be good to see the Government reduce tax on renewable energy in order to increase demand for the product."

Mike Stevenson, Head of Marketing at SwitchWithWhich.co.uk, said:
"This is a step in the right direction which will bring greater transparency and clarity for the consumer. As it stands, it's very confusing for people trying to work out how green an energy tariff is and exactly what they are buying into.

"Under the proposed guidelines, people who want to reduce their carbon footprint will be armed with the information they need to make an informed decision about which tariff is best for them.

"Although voluntary, we hope that all energy suppliers will welcome and adhere to these new guidelines."

Suppliers already have a legal obligation to supply a percentage of energy from renewable sources and this percentage increases every year. This means that every energy customer is already making a contribution to promoting renewables and lowering carbon emissions.

However, Ofgem wants to ensure that customers who buy green tariffs know if they are paying for the amount of renewable energy suppliers are already legally required to supply, or whether they are funding additional green supplies.

Suppliers would have to provide clear and standardised information on their website for each green offering, including the fuel mix of the tariff and information on sources of low carbon or renewable generation.

The revised guidelines are expected to be published early next year. Industry will then have six months to develop a certification scheme based on the guidelines. It is expected that the scheme will be up and running by next summer.