Energy retailer admits offsets ‘do not prevent or undo’ fossil fuels harms in greenwashing settlement

EnergyAustralia has apologised to the 400,000 subscribers to its carbon offset programme and admitted “offsets do not prevent or undo the harms caused by burning fossil fuels” as part of a settlement in a greenwashing case.

The landmark public statement by an energy company is the result of campaigning by NGO Parents for Climate, which launched a greenwashing lawsuit against EnergyAustralia in 2023 over the claim that the firm’s ‘Go Neutral’ programme customers were buying carbon-neutral electricity. (Apple is currently facing a similar lawsuit in the US.)

“Where a residential customer opted in to the Go Neutral product, their electricity or gas use was still sourced predominantly from fossil fuels. Burning fossil fuels creates greenhouse gas emissions that are not prevented or undone by carbon offsets. This could have been made clearer to customers,” the company said in its apology statement. 

EnergyAustralia withdrew its Go Neutral product in July 2024, and says it has now “shifted its focus to direct emissions reductions”.

‘Historic acknowledgement’

The greenwashing case was meant to start in Australia’s federal court last week, but the two parties agreed to a settlement today (May 19). 

“Not only does this acknowledgement send a powerful message that the era of unchecked greenwashing is over, but it’s incredibly reassuring to see the commitment from one of the largest energy retailers in the country to want to do better for their customers and the climate,” said Nic Seton, CEO of Parents for Climate.

“This outcome is validation for the scientists, carbon market experts and community groups who have for years been speaking out against the way carbon ‘offsets’ are used by corporate Australia and in government policy as a false solution to the climate crisis.” 

Towards the end of ‘carbon neutral’ claims

Firms making carbon neutrality claims have faced increased scrutiny in recent years, after several reports questioned the actual climate impact of carbon credits.

In January 2024, the EU outright banned unsupported green claims, including those based on carbon offsetting, with a new directive set to come into force next year. Several companies have stopped buying carbon offsets altogether, repurposing the investment towards actual reduction measures.

The growing consensus is now that high-quality carbon removals will play a part in the transition to net zero (with several public and private initiatives underway to improve the integrity of the carbon credit market) – but that they should only be used to offset residual emissions. 

Standard-setters are still allowing a certain degree of flexibility in using carbon offsets to tackle Scope 3 emissions, but the Voluntary Carbon Market Initiative (VCMI) Claims Code of Practice states that companies must first set reduction targets in line with the Science Based Targets Initiative (SBTi) and demonstrate progress towards these before making an offset-based claim.