What makes the address bar in IE turn green?

Solution 1:

Yes, it is a different level of certificate, as you say.

It's green when it is an Extended Validation Certificate. See Extended Validation Certificate at Wikipedia: "[...] a special type of X.509 certificate which requires more extensive investigation of the requesting entity[2] by the Certificate Authority before being issued. [...]"

The cheapest of certificates are usually domain-validation only, meaning the only thing that the certificate authority is guaranteeing is that the requestor of the certificate has control of the domain name. That's a very low threshold. The extended validation certificates require more than that. For instance, they verify the legal status of the business that is requesting the certificate, etc.