Energy Star, according to officials, largely relies on manufacturers or  others to identify and report products claiming to meet Energy Star  criteria that are violating the rules. The federal government has placed significant emphasis and allocated tax  dollars to encourage the use of energy-efficient products. In addition, the American Recovery  and Reinvestment Act (ARRA) of 2009 increased and extended the  energy tax credits for homeowners who make energy-efficient  improvements to their existing homes. Each state and U.S. territory was allowed to design its own  rebate program and all 56 plans have been app roved by DOE. 26 U.S.C. As noted by the Consortium for  Energy Efficiency, the EPA Office of the Inspector General (OIG),  Consumer Reports, DOE OIG, and a prior GAO report there is  currently no requirement for independent third-party verification of energy  performance reporting for most product categories prior to gaining access  to Energy Star logos and promotional materials. Based on our investigative results, we found  that the current process for becoming an Energy Star partner and  certifying specific products as Energy Star compliant provides little  assurance that products with the Energy Star label are some of the most  efficient on the market. Our proactive testing  revealed that the Energy Star program is primarily a self-certification  program relying on corporate honesty and industry self-policing to protect  the integrity of the Energy Star label. Table 1 below summarizes the  certification details of bogus products submitted for Energy Star  qualification during the course of our investigation. For all cases, Energy Star did not call our bogus firms or  visit our firm’s addresses. Energy Star Product Certifications

We successfully obtained Energy Star qualification for 15 bogus products,  including a gas-powered alarm clock and a room cleaner represented by a  photograph of a feather duster adhered to a space heater on our  manufacturer’s Web site. This control resulted in the fan being rejected. Undercover Tests Expose Weaknesses in Fraud Prevention Controls

We found that for most of the bogus products we submitted, the Energy  Star program preventive controls were ineffective, rendering the program  vulnerable to fraud and abuse. However, we found that controls over  specific product certifications were not effective in preventing firms from  submitting bogus energy-efficiency data. We found that Energy Star is for  the most part an online self-certification program. Only 4 of 20 products  we tested required independent verification of energy use and other  industry standards by a third party. Officials  acknowledged that currently the Energy Star program relies on self- policing, manufacturer integrity, and after-market testing for high volume  products in cases where there is not a third-party testing requirement for  certification. Because all of these controls occur after a product has been certified by  Energy Star and placed on the market, we were not able to test their  effectiveness and did not validate agency representations. Appendix I: Scope and Methodology

To perform the undercover test of attaining Energy Star partnership and  earning Energy Star qualification for fictitious products, we consulted  publicly available audit reports by federal agencies and consumer  advocacy publications to identify program vulnerabilities to inform our  methodology. We submitted Energy Star Partnership Agreements for each of the four  bogus manufacturing firms and fictitious product energy-efficiency  specifications via e-mail to the Energy Star program to obtain partnership  and certify products. For example, at the  beginning of testing, products mirroring efficiency standards of listed  Energy Star products were submitted, whereas in the later stages of the  proactive testing phase of this investigation, we submitted an implausible  product for Energy Star certification. We briefed program officials with  the Department of Energy, Environmental Protection Agency (EPA) and  EPA OIG as well as attorneys with the Consumer Protection division of the  Federal Trade Commission (FTC) on the results of our work, and  incorporated their comments concerning controls in place to protect the  Energy Star label from fraud and abuse.
Why GAO Did This Study

American consumers, businesses, and federal agencies rely on the Energy Star program to identify products that decrease greenhouse emissions and lower energy costs. In addition, the federal government and various states offer tax credits and other incentives to encourage the use of energy-efficient products including Energy Star products. Specifically, approximately $300 million from the American Recovery and Reinvestment Act will be used for state rebate programs on energy-efficient products. The Energy Star program, which began in 1992, is overseen jointly by the U.S. Department of Energy (DOE) and the U.S. Environmental Protection Agency (EPA). Given the millions of dollars allocated to encourage use of Energy Star products and concerns that the Energy Star program is vulnerable to fraud and abuse, GAO was asked to conduct proactive testing to (1) obtain Energy Star partnership status for bogus companies and (2) submit fictitious products for Energy Star certification. To perform this investigation, GAO used four bogus manufacturing firms and fictitious individuals to apply for Energy Star partnership and submitted 20 fictitious products with fake energy-savings claims for Energy Star certification. GAO also reviewed program documents and interviewed agency officials and officials from agency Inspector General (IG) offices.

What GAO Found

GAO's investigation shows that Energy Star is for the most part a self-certification program vulnerable to fraud and abuse. GAO obtained Energy Star certifications for 15 bogus products, including a gas-powered alarm clock. Two bogus products were rejected by the program and 3 did not receive a response. In addition, two of the bogus Energy Star firms developed by GAO received requests from real companies to purchase products because the bogus firms were listed as Energy Star partners. This clearly shows how heavily American consumers rely on the Energy Star brand. The program is promoted through tax credits and appliance rebates, and federal agencies are required to purchase certain Energy Star certified products. In addition, companies use the Energy Star certification to market their products and consumers buy products relying on the certification by the government of reduced energy consumption and costs. For example, in 2008 Energy Star reported saving consumers $19 billion dollars on utility costs. The table below details several fictitious GAO products certified by Energy Star. GAO found that for our bogus products, certification controls were ineffective primarily because Energy Star does not verify energy-savings data reported by manufacturers. Energy Star required only 4 of the 20 products GAO submitted for certification to be verified by an independent third party. For 2 of these cases GAO found that controls were effective because the program required an independent verification by a specific firm chosen by Energy Star. However, in another case because Energy Star failed to verify information provided, GAO was able to circumvent this control by certifying that a product met a specific safety standard for ozone emission. At briefings on GAO's investigation, DOE and EPA officials agreed that the program is currently based on self-certifications by manufacturers. However, officials stated there are after-market tests and self-policing that ensure standards are maintained. GAO did not test or evaluate controls related to products that were already certified and available to the public. In addition, prior DOE IG, EPA IG, and GAO reports have found that current Energy Star controls do not ensure products meet efficiency guidelines.