Peddling False Solutions to Worried Consumers: the Promotion of Greenhouse Gas ‘Offsetting’ as a Misleading Commercial Practice

Abstract

Corporations increasingly claim that the greenhouse gas (GHG) emissions related to their products have been “offset”, or that their entire business is “carbon neutral.” The concepts of GHG “compensation”, “offsetting” and “neutralization” describe the idea that the climate harm caused by GHG-emitting activities could be undone by “offsetting activities”, such as afforestation. The underlying premise is that the climate impact of such offsetting activities is equivalent to that of GHG-emitting activities, thereby counterbalancing them.

Consumer law requires marketing claims to be factually accurate. The problem with offsetting claims is that the equivalence assumption on which they are based does not stand up to scientific scrutiny. The climate benefits attributed to offsetting activities are significantly less certain than the climate harm caused by GHG-emitting activities, which means that no equivalence between the two can be assumed. Offsetting claims must therefore be considered to be factually incorrect: In the absence of equivalence, offsetting activities do not, and cannot achieve the promoted “compensation”, “neutralization” or “offsetting” of the climate harm caused by GHG-emitting activities. This is liable to influence the choices made by consumers who are concerned about the climate, which means that offsetting claims constitute misleading commercial practices. Recent decisions by the Dutch advertising authority confirm this view.

This article examines the legality of offsetting claims in advertising. The first section discusses the ban on misleading advertising under the Unfair Commercial Practices Directive (UCPD) and comparable instruments, and its application to environmental marketing claims. It will be shown that the core obligation of advertisers is to provide factually correct information that is supported by objective evidence. The second section addresses different examples of offsetting claims. It will be argued that they all have a common denominator, namely the assumption that the climate effect of offsetting activities is equivalent to that of GHG-emitting activities, which would enable the former to counterbalance the latter. The third section shows that this assumption of equivalence is factually incorrect, as the benefits attributed to offsetting activities are significantly less certain than the harm caused by GHG-emitting activities, making the two incommensurable. Applying the UCPD to offsetting claims, the fourth section finds that they are misleading. The fifth section distinguishes offsetting claims in marketing from the use of offsetting mechanisms under public mitigation regimes such as the Paris Agreement, showing that they do not affect the legality of corporate offsetting claims under consumer law.

Keywords: carbon offsetting, climate change, consumer law, Unfair Commercial Practices Directive

JEL Classification: K20