In 2020, the European Commission combed through the environmental claims on products sold in the Union. The result: 53.3 percent were vague, misleading or unfounded. Four out of 10 claims were completely lacking in supporting evidence. Among the most common and least understood terms was, and is, “carbon neutral.”
81 percent of Europeans support the EU goal of achieving climate neutrality by 2050, according to the Eurobarometer published in June 2025. But the same poll, conducted between February and March 2025 among more than 26,000 citizens in the 27 member states, reveals that 52% believe the mainstream media do not provide clear information on climate change. And 49% struggle to distinguish reliable information from misinformation on social media. We largely agree on the goal, much less on what it means to achieve it.
Two radically different ways
Let’s start with the basics. When a company declares itself “carbon neutral,” what exactly is it saying? On a technical level, it is saying that the CO₂ emissions generated by its activities have been “balanced.” But balanced how? Here the distinction becomes crucial, because there are two radically different ways to arrive at that balance.
The first is to reduce: change production processes, switch to renewable energy sources, redesign logistics, cut emissions at the source. The second is to offset: continue to emit as before, but buy “carbon credits,” that is, finance projects that are expected to absorb or avoid an equivalent amount of CO₂ elsewhere in the world. Plant trees in the Amazon, protect a forest in Congo, install solar panels in India.
An analogy helps. Imagine you have a leaky faucet that floods the bathroom. To reduce means to repair the faucet. Compensating means leaving the faucet running and paying someone to dry the floor in another room. In both cases you can say “the water budget is balanced.” But in one case you have solved the problem, in the other you are displacing it. And the result depends entirely on how effective the dryer’s work is.
This distinction is at the heart of an ambiguity that allows very different statements to sound identical. The Net Zero standard of the Science Based Targets initiative (SBTi), the most widely adopted framework for corporate climate targets, is explicit: to declare “net zero,” a company must have reduced at least 90 percent of its actual emissions throughout the value chain. Only the residual, maximum 10%, can be neutralized, and only through permanent carbon removal. Offset credits do not count as reduction.
In practice: according to the scientific standard of reference, a company that offsets 100 percent of its emissions without reducing any can now call itself “carbon neutral,” but not “net zero.” The two labels sound similar. They describe opposite realities. And as we shall see, this possibility has its months numbered: as of September 2026, the European Union will ban it.
A nine-month journalistic investigation
And why does Europe ban it? To answer let’s go to August 2023, when the scientific journal Science published a study conducted by Thales West and colleagues at Vrije Universiteit Amsterdam. The researchers analyzed 26 REDD+ forest protection projects in six countries, all certified by Verra, the world’s largest certifier of carbon credits, with more than one billion credits issued. The result: the vast majority of credits analyzed did not correspond to actual emission reductions. The projects tended to overestimate the deforestation that would have occurred without their intervention, generating credits for forests that would likely have stood anyway.
The study had been anticipated by a nine-month journalistic investigation conducted by the Guardian, Die Zeit, and the investigative organization SourceMaterial, published in January 2023, which brought the issue to public attention. By May 2023, Verra’s CEO had resigned. The organization has initiated a review of its REDD+ methodologies.
The study by West et al. has been challenged. A group of scientists led by Ed Mitchard published a rebuttal in December 2023, identifying what it believes to be significant methodological errors in the selection of control areas and calculation of benefits. Verra herself has challenged the use of “synthetic controls,” arguing that they do not capture project-specific local conditions. The methodological issue remains open and complex.
But the point that emerges from the affair, and on which even defenders of the system agree, is structural: the voluntary carbon credit market has recognized integrity problems. Verra himself has admitted the need to reform methodologies. And the Corporate Climate Responsibility Monitor 2023, carried out by NewClimate Institute and Carbon Market Watch, analyzed the climate declarations of 24 large international companies and found that the average “carbon neutrality” declaration covered just 3 percent of the company’s actual carbon footprint. All neutrality statements were rated as having poor integrity.
A consumer reading “carbon neutral” on a product might reasonably assume that the company’s entire business is carbon balanced. In reality, that label might refer to a tiny fraction of total emissions.
European courts take a stand
European courts have begun to take a stand. On June 27, 2024, the German Federal Supreme Court (Bundesgerichtshof) issued the first ruling by a national supreme court in Europe on the use of the term “klimaneutral” in advertising. The case concerned Katjes, a German confectionery manufacturer that had advertised its products as “klimaneutral” in a trade newspaper. The production was not zero-emission: the company was funding offset projects through a partner, with a link to the external website and a QR code in the ad.
The Court ruled that the term “klimaneutral” is ambiguous, because it can mean both reduction of emissions in production and simple offsetting through credits, and that reduction and offsetting are not equivalent means: reduction has priority over offsetting. The Court equated the standards of clarity required for environmental claims with those for health claims, recognizing that the risk of misleading the consumer is particularly high in both cases. A QR code linking to an external site is not enough: the explanation must be in the ad itself.
So far, the picture: “carbon neutral” is a term that anyone can use, which can mean very different things, and which the courts have begun to consider misleading. But these were rulings on individual cases. Now the framework is changing for everyone.
The European Union is moving in the same direction. The Empowering Consumers for the Green Transition ( ECGT) directive, signed into law in February 2024 and entering into force in March 2024, will apply from September 2026. It prohibits claims that a product has a “neutral, reduced, or positive” impact on greenhouse gas emissions when these claims are based on offsetting through carbon credits rather than actual reduction over the product’s life cycle. In practice: from 2026, carbon neutral labels based on offsets will be banned on products sold in the EU. Companies will still be able to communicate their support for climate projects, but they will not be able to present it as a direct offset of their emissions.
The proposed directive
The proposed Green Claims Directive, which would have regulated in even more detail the substantiation of environmental claims, was withdrawn by the European Commission in June 2025 after the withdrawal of support from the European People’s Party and Italy. But the ECGT Directive remains in place, is law, and the penalties provided go up to 4 percent of annual turnover.
“Carbon neutral” works like “natural gas,” the term we saw in the first installment of this column: it sounds reassuring, evoking responsibility and commitment, but the technical meaning is more nuanced than the sound of the words suggests. A “carbon neutral” product may have been manufactured with the same emissions as before, with the only difference being a payment to a project on the other side of the world that should balance the bill.
The opacity of “carbon neutral” is not necessarily built to deceive. In many cases, companies follow existing standards and recognized certifications. But the absence of a shared, verifiable meaning creates the space where confusion thrives and consumers have no tools to distinguish a real commitment from an accounting exercise. It is the difference between misinformation and disinformation with which we opened this column: harm does not always require intent.
The next time you read “carbon neutral” on a product or in a corporate statement, the useful question is not whether the company is committed to the climate. It’s a more precise question: did it reduce its own emissions, or did someone else pay for it? And how much of those emissions does that statement really cover? If the answer is not clear and convincing, as of September 2026 in the European Union it cannot appear on the label.
