EnergyAustralia is set to appear in the Federal Court from today in the first Australian court case brought against a retail energy company for alleged greenwashing and making ‘carbon neutral’ marketing claims.

Initiated by Parents for Climate, the case centres on allegations that the energy retailer misled over 400,000 customers regarding the climate impact of its ‘Go Neutral’ product, a breach of Australian Consumer Law. The legal action was filed on 9 August 2023 in the Federal Court of Australia and emerges in the wake of a European Parliament decision to ban similar conduct overseas, highlighting growing scrutiny over environmental claims made by corporations. Parents for Climate is represented by Equity Generation Lawyers.

The company’s ‘Go Neutral’ products, which consumers could opt-in at no additional cost, are at the heart of the legal dispute. EnergyAustralia had claimed on its website that “Go Neutral electricity and gas is ‘carbon neutral’;” and that “emissions created by ‘Go Neutral’ electricity and gas are ‘cancelled out’ or ‘negated’;” Furthermore, the company asserted that by opting into ‘Go Neutral’ products, consumers “have a positive impact on the environment”.

While “Go Neutral” customers were purchasing energy mainly sourced from burning fossil fuels, EnergyAustralia had then promised to purchase carbon credits to “offset” the associated emissions. EnergyAustralia, Australia’s third largest domestic greenhouse gas emitter, produced 17.4 million tonnes of CO2 equivalent in the 2022/23 period.

Parents for Climate challenges these assertions, and has argued the claims amount to misleading or deceptive conduct contrary to section 18 of the Australian Consumer Law. Its lawyers will argue carbon offsets do not effectively ‘cancel out’ emissions and lack ‘additionality’. The group seeks a declaration from the court that EnergyAustralia misled customers and an order to restrain the company from making ‘carbon neutral’ claims in the future.

In response to the legal proceedings, EnergyAustralia has ceased offering ‘Go Neutral’ to new customers and has removed the product page from its website. The final hearing for the case kicking off today is set to run for two weeks.

This case is significant as it represents a growing trend of legal challenges against companies for alleged greenwashing. The outcome may have broader implications for the energy sector and its marketing practices in Australia.

Lawyer David Hertzberg will be leading the case for Parents for Climate and told SMH: “It’s the first case in Australia that will squarely grapple with the idea that fossil fuel energy can’t be carbon-neutral because offsets don’t neutralise the harms of burning those fossil fuels.”

Specifically, Parents for Climate is arguing that paying someone else to avoid generating emissions (known as an “avoidance” credit) does not undo the impact of the emissions generated from “Go Neutral” energy. “This is because avoidance credits do not involve removing any CO2 from the atmosphere, and there is inherent uncertainty in whether avoidance credits have achieved what they claim to achieve. Almost 99% of EnergyAustralia’s carbon credits are avoidance credits,” Parents for Climate stated in its claim.

“To provide any benefit to the climate or the environment, the carbon credit must add climate benefits that would not otherwise have occurred without the carbon credit project (known as “additionality”). Otherwise, purporting to “offset” GHG emissions by purchasing carbon credits which lack additionality ultimately results in further increases in the atmospheric concentration of GHGs.”

Parents for Climate additionally argues the avoidance credits purchased by EnergyAustralia lacked additionality.

“Paying someone else to flare methane (which is a type of “avoidance” credits) not only suffers from the same problems that all avoidance credits have, it results in a significant additional increase in the concentration of greenhouse gases because there is a lack of equivalence between short-lived methane and effectively permanent CO2 emissions,” the legal claim continues. “Paying someone else to remove carbon emissions from the atmosphere (known as a “removal” credit) does not cancel out or negate the emissions generated from “Go Neutral” energy because the carbon removal projects EnergyAustralia buys are short-lived and not permanent.”

An EnergyAustralia spokesperson told Mi3 it has been working closely with Parents for Climate over the last number of months. “We remain optimistic we can resolve this issue together,” the spokesperson stated. “EnergyAustralia 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.”

In its Federal Court defence, EnergyAustralia denies it made the alleged representations on its website and that the representations were misleading or deceptive (if they were made). It also argues the statements in its website would have been understood as expressions of EnergyAustralia’s opinion rather than as statements of fact.

Parents for Climate, in its Reply, maintains the statements on EnergyAustralia’s website would have been understood as statements of objective fact. Parents for Climate further argues that, even if the statements would have been understood as expressions of opinion, these were not based on reasonable grounds and misstated the facts.

Parents for Climate seeks a declaration that EnergyAustralia has misled its customers since 2019 about the greenhouse gas emissions associated with their electricity and gas usage. It’s also seeking an order EnergyAustralia be restrained from making “carbon neutral” or similar statements to describe the “Go Neutral” product, and that it issue a corrective statement to its customers.