Companies that encourage consumers to invest in green projects that they claim will tackle climate change are to be policed by trading standards officers.

Bogus companies that exploit public interest may get prison sentences of up to two years and fines of up to £5,000, it was announced yesterday.

The move, announced by David Miliband, the Environment Secretary, comes amid increasing concern at the rise of fraudsters who are cashing in on the carbon-offsets market.

Thousands of people are now willing to pay for the damage they are doing to the environment by, for example, flying to New York or driving to the South of France or Cornwall.

Others are willing to offset their total annual mileage and even the total amount of electricity and gas that they use each year. They can buy trees or pay for energy-efficient light bulbs in developing countries.

But there are fears that this unregulated market could be a magnet for conmen. At present, it is difficult for consumers to find out exactly what happened to the cash that they paid to offset a holiday. Companies also have different pricing systems for carbon, which varies from £2 to £19 a tonne. Companies also use different calculators to work out the amount of emissions generated by a particular journey or use of energy.

Mr Miliband set out the first steps to try to introduce some form of regulation in this market. By the end of the year he hopes to develop a definable standard so that consumers can have confidence in companies that they choose to handle their carbon offsets.

A standard calculator is to be included in the package, which may also even up prices.

Companies can apply to the Department for Environment, Food and Rural Affairs to use a logo. Any company using the logo offers a guarantee that all its offset schemes can be fully audited and people can be assured that their cash is being used for legitimate projects that comply with international environmental treaties.

Consumers will also have the right to know how much of their offset payment is being used on company administration charges. This way they will be able to shop around to find the best deal.

Eventually, it is hoped that high street stores may also offer shoppers the choice to buy an offset if they choose a high- energy domestic appliance. While the government standard and logo is to be voluntary, it is possible that as the market develops there may be need for compulsory compliance and inspection. Britain is the first country to attempt to devise such a standard and it is hoped that it may be the plan for a common standard throughout Europe and eventually the world.

Only four carbon-offsetting companies have so far signed up to the government scheme but others are expected to enlist when the standard is ready. First Choice holidays and lastminute.com have already indicated that they will comply with the standard at the end of the year.

Rough Guides, the travel publisher, has also agreed to recommend to its readers to look out for the government logo before choosing an offsetting company.

But green campaigners were sceptical. They believe offsetting is not the answer to tackling climate change and fear it does nothing to persuade consumers to change their behaviour and reduce carbon emissions. Friends of the Earth dubbed the plan “a smokescreen to avoid real measured to tackle climate change”.

WWF feared that consumers had seized carbon-offset credits as a panacea that would allow polluters to continue pumping out carbon.

But Mr Miliband acknowledged: “Offsetting isn’t the answer to climate change. The first step should always be to see how we can avoid and reduce emissions through thinking about how we use energy in our homes and businesses and the way we travel. However, some emissions can’t or won’t be avoided. That’s where offsetting has a role to play. It’s a way of compensating for the emissions.”

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