Incoming European Union (EU) legislation is poised to impose stricter standards on corporate climate claims, but questions abound regarding the use of offsetting to meet emission reduction commitments. Under a leaked draft proposal, companies would be largely permitted to rely on carbon offsetting to substantiate their climate-friendly assertions. However, critics contend that such practices could create a disparity between standards applied to companies and those governing the products and services they offer.
In an updated draft document dated May 22, Belgium has made a potential final attempt to establish intergovernmental consensus on the proposed Green Claims Directive before passing the EU Council presidency to Hungary in July. A key point of contention in the negotiations has centered on the extent to which offsetting, the purchase of tradable carbon credits to balance greenhouse gas emissions, should be allowed to support corporate climate impact claims. The European Parliament has expressed support for limiting offsetting to ‘residual’ emissions, those remaining after companies have exhausted all practical means of internal reduction.
However, the latest draft suggests that member states may advocate for broader use of certified carbon credits, which proponents argue reflect and promote legitimate climate mitigation initiatives such as renewable energy deployment or reforestation projects. This stance is set to clash with separate regulations on product and service environmental claims, adopted in March, which prohibit climate-friendliness assertions based on carbon offsetting. This creates the potential for a situation where a company may be prohibited from selling offset-based ‘low carbon’ or ‘green’ flights, yet simultaneously claim in its advertisements that the corporation as a whole has reduced its carbon footprint or is on a ‘net-zero’ trajectory.
Environmental Coalition on Standards specialist Margaux Le Gallou raises concerns, stating, ‘Carbon offsetting doesn’t magically erase emissions – it simply greenwashes them using an accounting trick.’ She adds, ‘If the Council allows the use of carbon credits without limits, companies will have little incentive to reduce their emissions.’ ‘The Green Claims Directive must align with the science and EU climate commitments under the Paris Agreement by banning the use of carbon credits for everything beyond residual emissions,’ she emphasizes.
The draft legislation includes a significant update for petroleum firms, clarifying that a company’s total carbon footprint would encompass Scope 1, 2, and 3 emissions. Net-zero pledges by most petroleum companies currently only cover Scope 1 and 2 emissions, directly emitted by the company and those associated with consumed energy. Scope 3 emissions include indirect emissions linked to a company’s activities, such as the end-use of its products.
The compromise draft was scheduled for discussion by national delegates in a Council environment working group on May 28. The Belgian presidency aims for adoption by senior diplomats on June 5, followed by environment ministers at a summit on June 17. Negotiations with the newly elected European Parliament are anticipated to commence in mid-September at the earliest.
