Oil giant Shell has once again had its knuckles rapped by the watchdog for overstating its green credentials after it claimed in an advert that its $10bn oil sands project in northern Canada represented a "sustainable energy source".

The Canadian tar sands, which are being targeted by Shell, BP and several other oil majors, are being strip mined so that the recovered bitumen can be turned into oil. However, the projects have been condemned by environmentalists who claim that because the refining processes involved require far more energy than conventional oil, it is responsible for up to eight times more carbon emissions.

Despite these concerns, the Shell advert cited both its oil sands project and its plans to build the largest refinery in the US as examples of how the company is attempting to "meet the growing need for energy in ways that are not only profitable, but sustainable".

The advert attracted a complaint to the Advertising Standards Authority (ASA) from environmental group WWF over the use of the word sustainable with reference to the two projects.

Shell told the ASA that the term was based on the World Commission on Environment and Development definition of sustainable development as " development which meets the needs of the present generation without compromising the ability of future generations to meet their own needs", adding that the company "recognised the importance of affordable and convenient energy in achieving that, while underlining the importance of protecting the environment" .

It added that the two projects had taken account of environmental considerations and that the company was committed to cutting carbon emissions by five per cent on 1990 levels by 2010.

However, the ASA upheld the WWF's complaint and in a ruling that is likely to have repercussions for all firms advertising their green credentials, rejected the argument that the lack of a universal definition meant the term sustainable was "likely to be ambiguous and unclear to consumers".

Citing Defra guidance on green adverts, the ASA noted that "claims should always avoid the vague use of terms such as sustainable, green, non-polluting and so on". It added that, "because sustainable was an ambiguous term, and because we had not seen data that showed how Shell was effectively managing carbon emissions from its oil sands projects to limit climate change, we concluded that on this point the advert was misleading".

The ruling comes just a week after a major report from the Co-operative Group and the WWF further cranked up pressure on oil firms to review their tar sands policies, arguing that the likelihood of carbon regulation meant that the projects represented an unacceptable risk to investors.

It is also the second time that the company has been taken to task over its advertising of green claims. In a high profile case last year, the ASA banned an advert from the company that showed an oil refinery emitting flowers instead of smoke which claimed it used "waste CO2 to grow flowers and waste sulphur to make super-strong concrete". In fact, the company captures less than 0.5 per cent of its direct CO2 emissions to help grow flowers.