Carbon offsets in the spotlight amid greenwashing litigation

Climate advocacy group Parents for Climate has pursued a civil case against Energy Australia on grounds of greenwashing. The advocacy group claimed that the energy retailer’s ‘Go Neutral’ product, which sold fossil fuel energy products marketed as carbon neutral, had misled consumers.

Policy think tank The Australia Institute has said that the litigation revealed the flaws in the government’s Climate Active scheme, a voluntary, government-led initiative which has provided businesses with climate certifications once they achieve ‘carbon neutrality.’

“Energy Australia’s ‘carbon neutral’ energy was certified as such by the Australian government for almost ten years and consumers have been led to believe that the product had no impact on the climate,” said Richard Denniss, Executive Director of The Australia Institute.

“The fact that Energy Australia is now being taken to court, accused of making misleading claims, suggests that the government has failed to ensure that the product was indeed Climate Active.”

Energy Australia’s ‘Go Neutral’ product relied on carbon offsets, which are investments into climate-positive projects such as reforestation and renewable energy. In theory, these offsets counterbalance a firm’s negative climate impacts, leading them to achieve net carbon neutrality.

In their lawsuit, Parents for Climate argued that paying somebody else to avoid generating future emissions - also known as ‘avoidance credits’ - did not undo emissions generated by burning fossil fuels, because they did not remove Co2 from the atmosphere.

They also claimed that ‘removal-based’ carbon credits, such as reforestation, could not offset the burning of fossil fuels in the long-term. This was because the net result shifted carbon from a near-permanent form of storage - fossil fuels in the ground - to more unstable forms of storage, such as trees.

Parents for Climate has alleged that Energy Australia’s marketing of their ‘Go Neutral’ products as carbon neutral had amounted to misleading or deceptive conduct, given the product’s reliance on carbon offsets.

In the wake of this litigation, The Australia Institute has called for the government’s Climate Active certification scheme to be referred to the ACCC and the National Audit Office in order to investigate conflicts of interest, administrative failures and compliance issues.

They argued that the Climate Active scheme promoted corporate greenwashing by positioning large emitters as climate leaders when they purchased climate offsets, even if they had done little to reduce their own emissions.

At time of writing, Energy Australia is listed as a certified brand on the Climate Active website. Their latest public disclosure statement listed their purchase of climate offsets and 'Go Neutral' initiative as the basis of their climate certification.

Energy Australia has said that they would progressively end their Go Neutral product.

“We’ve made a commercial decision to close Go Neutral while we focus on reviewing and updating our plan to help customers reduce their emissions,” they said on their website.

An Energy Australia spokesperson told The Guardian it had been working with Parents for Climate, and remained “optimistic we can resolve this issue together”.

“Energy Australia remains committed to decarbonising by investing in and supporting assets that enable the clean energy transformation, and helping our customers to directly reduce their emissions,” the spokesperson said.

The formal hearing began on Thursday and is expected to last for two weeks.

“Promoting big polluters as climate leaders punishes companies with legitimate climate ambition and misleads consumers. It rewards greenwashing while credible claims are unrecognised and unrewarded,” Denniss said.