A new rating system will help customers to compare energy companies' green tariffs, according to the regulator.
Ofgem wants electricity deals to be rated from A to F in the same way that household appliances are graded to reflect their energy efficiency.
It also wants companies to provide clear, standardised information to allow easier comparisons.
Consumer groups have welcomed the new guidelines, which Ofgem hopes will be in place by summer 2008.
Benefits
"The new rating scheme will eliminate confusion and encourage customers to seek deals that best meet their needs"
Ofgem chief executive Alistair Buchanan is confident that the new system will cut confusion and give energy customers more confidence when it comes to shopping around for green deals when they decide who they want to supply their electricity.
"Currently, customers find it difficult to compare the environmental benefits of the various energy deals on offer," he said.
"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," he added.
Ofgem has proposed two separate sets of guidelines. One will cover tariffs for energy produced from renewable sources, and another will cover tariffs from energy sources with low carbon dioxide emissions.
All suppliers' tariffs will be rated according to their "carbon intensity". Companies' claims will also be verified independently.
Cautious welcome
The guidelines are due to be published early next year. Suppliers will be given six months to develop a certification scheme which should be operational by next summer.
"We fully support the idea of developing a voluntary verification scheme that will make it easy for customers to compare green tariffs"
Although both bodies praise the proposals as "positive steps in the right direction", they believe more needs to be done to ensure consumers are clear about what 'low carbon' means.
Cassie Higgs, senior policy advocate at the NCC, said its recent investigation into green energy deals found evidence that some consumers were being misled.
"We called for new guidelines and independent accreditation of green energy claims, to make suppliers come clean about how 'green' their energy really is," she said.
"Ofgem has accepted the need for such guidelines, which is welcome. But many consumers could still be confused if the information isn't easily understood," she added.
Industry backing
The NCC's analysis found that the best green deals only cut a typical household's carbon dioxide emissions by around 6%.
Suppliers have a legal obligation to source a percentage of electricity from renewable sources, and this percentage increases every year.
Frances Williams from the Energy Retail Association said the industry was already working closely with Ofgem and consumer groups on this issue.
"We fully support the idea of developing a voluntary verification scheme that will make it easy for customers to compare green tariffs," she said.
"Renewable and low carbon tariffs are a niche but important emerging product area and it's important that we do this properly," she added.
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