Proceedings challenging a company’s ‘carbon neutral’ marketing claims came to an early close, after EnergyAustralia and environmental group, Parents for Climate, reached a settlement before the Federal Court hearing was set to commence. Parents for Climate had alleged that EnergyAustralia engaged in misleading and deceptive (‘greenwashing’) in promoting its Go Neutral products but discontinued the proceedings in light of those products being withdrawn and an agreed statement being published by EnergyAustralia.
This article considers the conduct, the parties’ pleadings and concessions made by EnergyAustralia in its statement. It also considers broader implications for the use of offsets as part of carbon reduction strategies.
While EnergyAustralia did not admit to engaging in misleading or deceptive conduct and the matter was not determined by the Court, the case highlights that companies should continue exercising caution in making claims about carbon neutrality premised on the use of offsets, particularly where such claims are being made directly to consumers. Careful consideration should also be given to the quality of offsets, even where their use is consistent with the government-backed Climate Active carbon neutral certification regime.
Conduct, claims and initial defence
EnergyAustralia’s Go Neutral products enabled customers to purchase energy primarily sourced by burning fossil fuels, but in respect of which it promised to purchase carbon credits to offset the associated emissions.
The Go Neutral products were offered on an opt-in basis at no additional cost to consumers.
In promoting the products, EnergyAustralia claimed that:
Go Neutral products were carbon neutral
Emissions created by Go Neutral products were cancelled out or negated
Customers opting into Go Neutral products would have a positive environmental impact.
In July 2023, Parents for Climate commenced proceedings alleging that EnergyAustralia engaged in misleading and deceptive conduct. Specifically, they argued that:
Avoidance credits do not undo the impact of emissions and may lack additionality (i.e. climate benefits that would not otherwise have occurred)
The carbon removal projects purchased by EnergyAustralia were short-lived and not permanent
Emissions from Go Neutral products ultimately resulted in an increase in the concentration of greenhouse gases in the atmosphere, exacerbating climate change and global warming.
Parents for Climate sought a declaration of contravention and requested a corrective notice.
EnergyAustralia’s defence
EnergyAustralia admitted it had engaged in the underlying conduct, but denied that:
The relevant representations were made
The conduct or any representations were misleading or deceptive.
It argued that any statements needed to be considered as a whole and in context, and would have been understood as expressions of opinion. It also defended the quality of the offsets it purchased by reference to a list of eligible offset units published by the Australian Government Department of Industry, Science, Energy and Resources, and Climate Active.
Parents for Climate’s reply
Parents for Climate maintained that the statements would have been understood as statements of objective fact, not opinion-based. Even if characterised as opinion, they argued that:
That opinion was not based on reasonable grounds
EnergyAustralia misstated the facts on which the opinion was based
The statements were made in circumstances where the company knew customers did not understand key terms such as ‘carbon neutral’.
Subsequent conduct and resolution
EnergyAustralia withdrew its Go Neutral products from the market in July 2024 and has since shifted its focus to direct decarbonisation initiatives. Parents for Climate discontinued the proceedings following the publication of an agreed statement.
Key extracts of the statement include:
EnergyAustralia…apologises to any customer who felt that the way it marketed its Go Neutral products was unclear. | |
While offsets can help people to invest in worthwhile projects that may reduce greenhouse gas emissions elsewhere, offsets do not prevent or undo the harms caused by burning fossil fuels for a customer’s energy use. Even with carbon offsetting, the emissions from burning fossil fuels for a customer’s energy use still contribute to climate change. | |
Burning fossil rules creates greenhouse gas emissions that are not prevented or undone by carbon offsets. This could have been made clearer to consumers. | |
EnergyAustralia acknowledges the importance of consumers understanding the climate impact of products and services offered to them and that offsets are not the most effective means of reducing greenhouse gas emissions. There are legitimate concerns about organisations:
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Some carbon offsets claim to remove carbon dioxide from the atmosphere by planting trees or forest regeneration. However, EnergyAustralia today accepts the scientific consensus that these “offsets” do not indefinitely remove greenhouse gas emissions from burning fossil fuels, because carbon is stored in plants for a substantially shorter time than those emissions remain in the atmosphere. Storing carbon in plants is not equivalent to keeping it stored in fossil fuels (by not burning those fossil fuels in the first place). | |
In recent years, questions have begun to emerge about the benefits of carbon offsets, including those offered as part of certified Government programs such as Climate Active and whether they are having the impact intended…While EnergyAustralia participated in the Climate Active certified carbon offset program in good faith, today EnergyAustralia accepts that there is legitimate public concern about the efficacy of those programs. |
No findings or admissions
EnergyAustralia did not admit that it had engaged in misleading or deceptive conduct and the issues were not the subject of judicial consideration.
Broader developments
Over the past 18 months, more than 100 companies have withdrawn from the Climate Active carbon neutral certification regime – the most recent departure being GreenCollar, Australia’s largest developer of carbon farming projects, on the same day as the EnergyAustralia and Parents for Climate settlement.
Despite this, industry stakeholders have emphasised the continued need for carbon credits to incentivise investment in emissions reduction and removal initiatives to support the transition to net zero and have also noted the ancillary co-benefits (e.g. for biodiversity) that may result from carbon farming projects. Further, the agreed statement acknowledged that “high-quality carbon offsets may play a role for hard to abate residual emissions”, although “it is important for organisations to provide clear and transparent information to consumers on where and how offsets have been used and what those offsets can achieve”.
Regulatory expectations: ACCC guidance for businesses
Similarly, the ACCC’s guide for business on making environmental claims recognises that “[t]ransitioning to a more sustainable business model takes time and is often not straightforward”. One of the case studies highlighted by the ACCC as good practice refers to purchasing high-integrity offsets to mitigate the emissions footprint of products and services where direct emissions reductions by a company are not available. The ACCC’s guide suggests that “if you can’t reduce your greenhouse gas emissions in the short term, but are instead offsetting your impact on the environment, make this clear to consumers”.
The guide encourages businesses to:
Avoid ambiguous terms like ‘carbon neutral’ without explanation.
Clearly distinguish between emissions reductions activities versus reliance on purchased offsets.
Disclose the type of offset projects used and ensure claimed environmental benefits are verified and not double-counted.
Take care when relying on third-party certification schemes for offsets and emissions, as the overall impression on consumers is key.
Select third-party certification schemes that are independent, transparent, reputable and robust.
Importantly, the ACCC expects companies to ensure that products or services do what they claim, even where they comply with the certification requirements.
This is particularly relevant where statements are being made directly to consumers, as in the case of EnergyAustralia.
Overall, businesses should tread lightly and seek advice in making emissions-related and carbon neutral claims, particularly where they involve use of offsets – even where their activities are certified under regimes such as Climate Active.