Greenwashed? Australian parents take energy giant to court

In August, Australian Parents for Climate Action (AP4CA), represented by Equity Generation Lawyers, filed a claim against EnergyAustralia in the Federal Court.

They argued the company is misleading consumers through its Go Neutral electricity and gas products.

By calculating emissions from household energy use and purchasing equivalent carbon offsets, EnergyAustralia – the country’s third-largest emitter – claims its products make home energy use “carbon neutral”, resulting in “a positive impact on the environment”.

“Our case challenges EnergyAustralia to stop misleading families over their Go Neutral electricity and gas products,” AP4CA CEO Nic Seton says.

“EnergyAustralia claims these products are carbon neutral when they’re in fact not. These two products sell households energy that’s sourced from fossil fuels.”

The climate we’re leaving our kids

AP4CA represents more than 20,000 parents across the country. Seton says he joined the group following the 2019–20 Black Summer bushfires, when his son was hospitalised with breathing difficulty during the extreme smoke events.

“I connected with other parents and realised the potential parents have to secure a safe climate by working together,” he says.

“As parents who care deeply about the climate we’re leaving our kids, we want EnergyAustralia to tell the truth about the impact of burning fossil fuels and to empower consumers to choose genuine clean and renewable energy.”

According to Seton, the group argues that energy produced through fossil fuels can’t be carbon neutral. He says the aim is not only to hold EnergyAustralia to account, but also to set a precedent for other companies in Australia.

“We are concerned that so-called offsets and carbon neutral claims have become widespread and unregulated, effectively creating a licence to pollute without scientific integrity,” he says.

“Instead, we would like to see every effort made to genuinely reduce the amount of carbon pollution caused by the burning of fossil fuels by companies and governments.”

In contravention of consumer law

David Hertzberg is senior associate at Equity Generation Lawyers. Hertzberg says his clients maintain that the “misleading or deceptive” nature of Go Neutral is in contravention of Australian Consumer Law.

“At the heart of this claim is the idea that, as a consumer, if you are told that your fossil fuel electricity or gas is carbon neutral, that your emissions have been cancelled out and that you’re having a positive impact on the environment, you’d be forgiven for thinking that, as far as climate change is concerned, it doesn’t matter how much energy you use, it won’t contribute to climate change,” Hertzberg says.

“You’d be wrong. When you burn fossil fuels to create energy you contribute to climate change, and buying carbon credits does not undo that.

“We will argue that when you burn fossil fuels, you create greenhouse gas emissions, and carbon credits do not remove an equivalent amount of emissions from the atmosphere. That means that so-called carbon offsets do not cancel out emissions – burning fossil fuels is never carbon neutral.”

Responding to the case, EnergyAustralia released comments denying its products were misleading or deceptive and stating that it intends to defend its position.

“EnergyAustralia is committed to ensuring that consumers can make informed choices in respect of our retail energy offering,” the EnergyAustralia statements read.

“EnergyAustralia is disappointed that the Australian Parents for Climate Action group has chosen to commence court proceedings rather than engaging with EnergyAustralia to share ideas about ways to ensure that consumers can make informed choices.”

Seton says AP4CA did engage with EnergyAustralia during the months prior to filing the claim.

“Ultimately, we weren’t able to resolve the dispute between us, which is why we’ve filed this claim,” Seton says.

“We’re disappointed that a company like EnergyAustralia wants to fight about this in court rather than ensuring their customers understand what they’re buying and taking real action on climate change.”

AP4CA is seeking a declaration that EnergyAustralia has misled its customers about the greenhouse gas emissions associated with their electricity and gas usage, and an order that EnergyAustralia issue a corrective statement to customers and be restrained from making carbon neutral or similar statements to describe the Go Neutral product.

Carbon neutrality, carbon offsets and carbon credits

At the core of AP4CA’s case is a question around the validity of offsetting emissions as a mechanism for companies to become carbon neutral.

EnergyAustralia’s Go Neutral products are part of the Climate Active Network, certified through the Australian Government’s Climate Active Carbon Neutral Standard.

Climate Active is a program that gives businesses, products, services, events, buildings and precincts a mechanism to be certified as carbon neutral.

The program is voluntary and claims to have one of the most rigorous carbon neutral certification processes in the world.

“Climate Active claims are subject to independent third-party verification to ensure the integrity of the carbon neutral claim,” the Climate Active website reads.

“The Climate Active Carbon Neutral Standard is underpinned by carbon accounting and offsets integrity principles, and built upon international best-practice standards and GHG protocols.”

In an effort to achieve carbon neutrality, carbon credits are purchased to compensate for emissions produced by a business. The purchase of these units goes to funding projects that see a reduction in emissions.

The business’s carbon neutral claim is then validated by an independent third party, and once reporting documents are assessed by Climate Active certification is given.

The key claim of Climate Active is that it “helps the community take action by making it easier to identify and choose brands that are making a real difference”.

However, whether companies can become carbon neutral through offsets is the subject of global academic debate.

With 25 years of research experience in carbon farming and carbon markets, Associate Professor Matthew Harrison is now systems modelling team leader at the University of Tasmania’s Tasmanian Institute of Agriculture.

“If everyone in the world were to offset, the atmosphere would see no real net reduction in carbon emissions to the atmosphere, and therefore no net mitigation of global warming,” Harrison says.

According to Harrison, companies and individuals can lessen their overall carbon contribution through either reduction, avoidance or removal.

Avoidance and reduction can both be integrated into a company’s operations. They are similar in their approach; avoidance doesn’t necessarily involve a reduction in emissions, but could mean an increase to production without an increase to emissions. This would avoid greenhouse gas emissions that would have otherwise occurred under a lower productivity scenario.

“Another way is carbon removals. So that’s actually sucking carbon dioxide out of the atmosphere,” Harrison says.

“That’s things like sequestration in vegetation and soils, and ensuring that the sequestered carbon remains stored for as long as possible before it returns to the atmosphere – carbon policies often call this permanence. You’ve also got engineering technologies like carbon capture and storage that’s sort of in its infancy, and can require significant capital investment.”

Harrison says projects should be assessed on a case-by-case basis to determine if an intervention results in a net reduction in atmospheric emissions.

The Carbon Credit Unit scheme

Australian Carbon Credit Units (ACCUs) are one mechanism whereby companies can purchase offsets created by Australian projects. One unit is awarded by the Clean Energy Regulator per tonne of carbon dioxide equivalent either directly removed from the atmosphere, or where the outcome of a project is an overall reduction in emissions.

There was an independent review of ACCUs delivery in December 2022, led by Professor Ian Chubb.

Key among the review’s findings was a need for provisions in legislation to be amended so that transparency around the ACCU scheme is increased.

In April 2023, the government gave in-principle support for all 16 recommendations made by the review, and published an implementation plan in June.

EnergyAustralia claims to have offset 4.1 million tonnes of carbon emissions since 2016, by purchasing carbon credits globally.

The company says its Go Neutral products support projects such as the replacement of less energy efficient lighting in India, strategic fire management in the Northern Territory, and renewable energy projects in India and Indonesia.

While Seton says the funding of projects that “create genuine renewable energy and carbon reduction benefits is a worthwhile thing to do,” the AP4CA is pushing back against EnergyAustralia’s claim of carbon neutrality.

The group argues that both avoidance and removal credits earned by a company through a third party do not cancel out or negate emissions produced by EnergyAustralia.

“Our issue is that claiming these carbon credits somehow offset or render its burning of fossil fuels as carbon neutral is scientifically and materially inaccurate and misleading,” Seton says.

“We’d love to see EnergyAustralia fund more socially and environmentally beneficial projects while also ensuring its climate claims are accurate.”

While AP4CA’s case is against the Go Neutral products specifically, Hertzberg recognises shortcomings in Climate Active certification.

“To the extent that Climate Active encourages polluting businesses to make carbon neutral claims, it is certainly problematic,” Hertzberg says.

To take dramatic steps

According to Harrison, companies should aim to do a combination of both reducing their own emissions and offsetting where necessary. However, he says, it is more difficult for some sectors to reduce their emissions within their value chain, and offsetting may be their only option.

“Other industries should be encouraged to inset their emissions reductions or sequester carbon within their value chain because they’ve got the ability to do so, such as the land use sector,” Harrison says.

“Somewhere along the line carbon dioxide has to be removed from the atmosphere. We urgently need to develop more cost-effective negative emissions technologies that suck large amounts of carbon out of the atmosphere, and permanently keep it from returning to the atmosphere.

“There is also a significant need to reduce greenhouse gas emissions to reduce the rate of global warming and mitigate the risk of dangerous climate change.”

Hertzberg acknowledges the challenges large energy companies face when trying to reduce emissions but maintains the need for clarity around claims of carbon neutrality.

“It’s true that a company like EnergyAustralia can’t stop burning fossil fuels tomorrow but in the meantime it can stop telling consumers that fossil fuel energy is carbon neutral,” Hertzberg says.

“There are fundamental flaws with polluting businesses like EnergyAustralia claiming to have offset fossil fuel emissions through the purchase of carbon credits.

“If we are to have any hope of achieving the goals of the Paris Agreement, all of us – everywhere in the world – need to take drastic steps to reduce our carbon emissions.

“So-called offsets are a licence to pollute and continue on with business as usual.”

Cleaning up greenwashing

The case put forward by AP4CA argues that, by misleading consumers around environmental impacts, EnergyAustralia is engaging in “greenwashing”.

“Parents want reliable and accurate information about making climate-conscious choices,” Seton says.

“Greenwashing distorts the market for consumers and investors genuinely seeking climate-friendly products and businesses while increasing climate harm through ongoing carbon pollution.”

Harrison says examples of greenwashing could occur “where a company claims environmental benefits or reduced emissions, or that their activities are environmentally friendly but in fact they are not”.

However, a lack of guidelines around what greenwashing is, and the potential impacts of greenwashing, are emerging global issues.

As societal demand for environmentally friendly, low and negative emissions products increases, Harrison says, greenwashing is likely to become more common.

Among a suite of measures to increase transparency around environmental claims, on 11 May 2023 the European Parliament adopted amendments to proposed greenwashing guidelines.

The amendments prohibit claims of carbon neutrality based solely on carbon offsetting schemes.

“Environmental claims, in particular climate-related claims, increasingly relate to future performance in the form of a transition to carbon or climate neutrality, or a similar objective, by a certain date,” the proposal adopted by the European Parliament reads.

“Through such claims, traders create the impression that consumers contribute to a low-carbon economy by purchasing their products.

“To ensure the fairness and credibility of such claims, Article 6(2) of Directive 2005/29/EC should be amended to prohibit such claims, following a case-by-case assessment, when they are based solely on carbon offsetting schemes or are not supported by clear, objective, quantified, science-based and verifiable commitments.”

Falling foul of existing laws

In Australia, the AP4CA case involves applying existing laws to the issue of greenwashing from a marketing perspective.

While the group aims to set a precedent to safeguard consumers from “misleading or deceptive” campaigns, Hertzberg says there is space for more legislative intervention.

“We think that greenwashing falls foul of existing consumer protection laws,” he says.

“That said, we’ve seen proposed or actual legislative intervention against greenwashing overseas. So the courts are an important forum to challenge greenwashing, but Parliament and regulators should take action too.”

On 29 March 2023, the Australian Senate referred an inquiry into greenwashing, with a report to be delivered by 5 December.

The inquiry will specifically focus on areas that include:

• environmental and sustainability claims made by companies
• the impact of misleading environmental and sustainability claims on consumers
• advertising standards in relation to environmental and sustainability claims
• legislative options to protect consumers from greenwashing in Australia.