Brussels, 23 March 2023. Yesterday, the European Commission published its legislative proposal on the substantiation and communication of explicit environmental claims (‘the Green Claims Directive’), aimed at reducing greenwashing. To make green claims (including climate-related claims) about the environmental footprint of their products, services, and operations, companies will need to prove them by submitting scientific evidence and reliable data to accredited verifiers. Once approved, companies will have to communicate their claims in a clear and transparent manner to consumers. To enforce that, EU Member States will have to set rules with dissuasive penalties.
Climate-related claims are one way for companies to attempt to communicate their climate mitigation efforts to their customers. If such claims fail, aren’t real, and don’t stand up to scientific scrutiny, they become a dangerous tool for greenwashing. Not only do such false claims mislead consumers, but they also lead to more carbon in the atmosphere which directly damages the livelihoods of people and the well-being of the planet. Without proper regulation, companies can claim to benefit the climate while continuing their damaging activities and being rewarded for it. In contrast, credible climate claims could allow companies to differentiate themselves from their competitors, enabling conscientious citizens to make educated purchase decisions, or giving governments a tool to incentivise environmental stewardship.
Carbon Gap is particularly concerned with claims regarding the climate impact of a product, service, or organisation, and in particular, any claim which attempts to demonstrate progress toward, or the achievement of, climate neutrality or net zero emissions. These claims must be tightly regulated to ensure that only credible claims can be made.
Since the publication of the Carbon Removal Certification Framework (‘CRCF’) proposal last November (see Carbon Gap’s initial reaction here), there has been an expectation that the Green Claims Directive would regulate the substantiation of such climate-related claims based on certified carbon removals, linking the two legislative proposals together. This expectation also comes in the aftermath of a recent finding that more than 90% of carbon credits used by companies to make different claims are largely inadequate, which led to follow-ups calling on the EU to disambiguate net zero claims. Unfortunately, the current Green Claims proposal does not meet these expectations and leaves a gaping hole in the EU legislative puzzle. Carbon Gap calls for stringent guardrails on any claims regarding a product, service, or an organisation’s net climate impact to prevent greenwashing, ensuring that emissions cannot be falsely netted against “avoidance” or “reduction” efforts that do not represent physical fluxes of carbon.
With the European Parliament and Council taking over this file in the legislative process, we offer our preliminary assessment and some initial recommendations.
The problem is correctly identified but…
The preamble of the proposal correctly states that climate-related claims are prone to being unclear and misleading, as they are often based on offsetting greenhouse gas (‘GHG’) emissions through carbon credits of low environmental integrity and credibility, generated outside the company’s value chain and calculated based on methodologies that vary widely and are not always transparent, accurate, or consistent. Offsetting can also deter traders from emissions reductions in their own operations and value chains.
We are encouraged by the Commission’s call for companies to prioritise effective emissions reductions to adequately contribute to global climate change mitigation targets. According to the proposal’s preamble, only residual emissions are potentially eligible for compensation, and we contend that the definition of what constitutes “residual” must be frequently revisited, ensuring that any emissions which can feasibly be eliminated are in fact eliminated.
While these valid considerations are introduced in the preamble, they do not appear entirely in the legally binding articles of the proposal. This must be amended to ensure the proposal delivers on its promise.
… the solution is insufficient
To address the inadequacy of climate-related claims, the proposal rightly requires companies to report GHG emissions on an absolute basis, separately from any carbon credits / “offsets” used to compensate for them (note that the proposal uses the term “offsets” to refer to what Carbon Gap defines as “carbon credits”, i.e., tradable units each representing 1 ton of CO2 avoided, reduced, or removed). They must disclose the share of total emissions that are addressed through offsetting and whether these come from emission reductions or removals. We would call for much more far-reaching disclosure, especially of which types of carbon credits they are purchasing (avoidance, reduction, removals), and which emissions they are claiming to compensate with which carbon credits. Only with this complete set of data, as well as information on the verification methods used to ensure integrity and correct accounting of these offsets, can the EU coherently and transparently police whether the claimed climate impacts are real.
The Commission further omits some crucial principles that would ensure that all climate-related claims deliver a clear climate benefit:
- Clearly defining what constitutes a legitimate “net zero” or “climate neutral” claim. At a minimum, the proposal must ensure that avoided emissions and emission reductions cannot be used to falsely claim that emissions have been neutralised. The IPCC’s definition of net zero and climate neutrality is clear: a balancing of emissions with physical removals. The scientific community has extended these definitions to the question of sub-global net zero claims, making it clear that emissions must be balanced with removals, not avoidances or emission reductions, in order to calculate net GHG emissions (according to e.g., Oxford Principles, SBTi net-zero standard, Nature). Offsets that avoid emissions, but do not physically remove and store carbon, must be barred from use in substantiating claims about net climate impacts (such as carbon footprint, net emissions, progress toward net zero, etc.), in keeping with clear scientific guidance.
- Respecting the non-fungibility principle and timescales of carbon storage. Fossil fuel emissions – the extraction and release of carbon from the geosphere into the atmosphere – should be eliminated in the first instance. Where impossible to eliminate, the only means of compensating for unabated fossil fuel emissions must be by returning atmospheric carbon to the geosphere (high-durability carbon removal). As it stands, the proposal allows any and all offsets, including from improved forest management and renewable energy projects, which purport to avoid emissions, without any clear criteria for which emissions these can compensate for nor which climate claims they can substantiate. CO2 and other GHG such as N2O have climate impacts that can span millennia, therefore any attempt to compensate for such emissions should store carbon for the same duration or longer. Removal and storage of carbon into the biosphere must be accelerated for its own sake, to halt and reverse the loss of ecosystems and natural carbon stocks, but must be ineligible as a means of claiming to compensate for fossil fuel emissions. Failing to enshrine this non-fungibility principle between the biosphere (terrestrial carbon sinks like soils and forests) and geosphere (mineralised carbon that is highly durable and long-lived) in EU law would allow fossil fuel companies to continue offsetting their long-lived emissions through projects with shorter-term carbon storage and a higher risk of reversal.
- Addressing mitigation deterrence by providing a definition of “residual” or “hard-to-abate” emissions that becomes more stringent over time. In the Green Claims Directive proposal, the Commission recognises that only residual emissions should be addressed through carbon removals, but fails to explain what that means. Without a definition that is scientifically robust, sector-specific, and possible to measure analytically and transparently, the boundary between ‘emissions that must be reduced’ and ‘emissions that can only be compensated for with carbon removals’ can be manipulated to deter mitigation efforts. The resulting climate-related claims would not be substantiated in a scientifically-sound or trustworthy manner. As technology evolves and circumstances change, emissions that were once classified as “hard-to-abate” will need to be re-classified. The EU will need to establish a transparent process for classifying emissions, empowering a group of disinterested and unconflicted experts to advise on which emissions companies may classify as difficult-to-decarbonise.
- Clarifying the link and improving interoperability with the CRCF. Currently, the proposal excludes from its scope environmental claims and labels substantiated by rules under, among others, the CRCF. This is confusing because the Commission’s draft proposal for the CRCF has no rules for claim substantiation, presumably in deference to the Green Claims Directive. Instead, the Green Claims Directive could fill that gap and establish the aforementioned guardrails for legitimate net zero claims, claims which would then need to be substantiated through the purchase of high-quality carbon removal credits certified under the CRCF.
Call to action
The proposal states that the Commission may adopt delegated acts further specifying the criteria for substantiation with regard to certain claims (e.g. climate-related claims). We call on the EU co-legislators to ensure that the above-mentioned principles are reflected in the Green Claims Directive itself while working in parallel on delegated acts. Without enshrining these principles in EU law, the proposal could end up exacerbating the very problems it wants to solve, increasing public distrust in environmental labelling, and leading to more climate damage through unpunished greenwashing.