The EU Bans Offset-Based Carbon Neutral Claims

At a glance

The blacklist

What becomes unlawful

Directive (EU) 2024/825 on empowering consumers for the green transition — the ECGT or EmpCo Directive — applies from 27 September 2026. It works by adding practices to the Annex I blacklist of the Unfair Commercial Practices Directive. A blacklisted practice is prohibited in all circumstances: there is no case-by-case balancing, no substantiation defence, and no de minimis threshold. Either the claim is made or it is not.

The entry that reshapes carbon procurement prohibits claiming that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions on the basis of offsetting emissions outside the product's value chain. Commentary on the directive lists the caught formulations as including ‘climate neutral’, ‘CO2 neutral certified’, ‘carbon positive’, ‘climate net zero’, ‘climate compensated’, ‘reduced climate impact’ and ‘limited CO2 footprint’.

Credit quality does not enter the test. An ICVCM CCP-labelled durable removal retired against a product produces the same legal outcome as an unrated avoidance credit from a project nobody has audited. That is a deliberate design choice by the legislator, and it is the single point most often missed in procurement conversations: buying better credits does not restore the claim.

Three further blacklist entries land alongside it. Generic environmental claims — ‘sustainable’, ‘green’, ‘eco-friendly’, ‘energy efficient’ — are prohibited unless the trader can demonstrate recognised excellent environmental performance, such as the EU Ecolabel, a national scheme like Germany's Blue Angel, or top class under the Energy Labelling Regulation. Claims about a whole product or a whole business that in fact concern only one aspect or one part are prohibited. And presenting a minimum legal requirement as a distinctive feature of the offer — recycled content mandated by law, presented as a brand achievement — is prohibited.

The permitted set

What you can still say

The directive is narrower than the alarm around it suggests. It regulates business-to-consumer commercial practice. It does not regulate corporate climate reporting, investor communication, or the use of carbon credits itself. Four things survive intact, and they are where a credible claims architecture now has to sit.

The forward-looking carve-out is the one worth studying, because it is the only route left to a headline climate message attached to a brand. It is also demanding: an implementation plan with resource allocation, independently verified on a recurring basis, with the verifier's findings made available to consumers. That is closer to an assurance engagement than a marketing sign-off.

Third-party verification

Sustainability labels need a scheme behind them

A second change lands on the same date and is being under-read. From 27 September 2026, any sustainability label used in the EU must either be established by a public authority or rest on a certification scheme that meets the directive's requirements. The definition of sustainability label is wide — any trust mark, quality mark or equivalent that distinguishes a product or business by environmental or social characteristics. Commentary on the directive names B Corp, the Global Organic Textile Standard, Fairtrade and the Forest Stewardship Council as examples of marks caught by the definition.

The scheme behind the label must meet requirements on transparency, openness and credibility, and the trader's compliance with it must be verified by a third party independent of both the scheme owner and the trader. Where that is not the case, the label cannot be displayed in the EU at all. Legal responsibility sits with the trader displaying the mark, not only with the scheme operator — so a brand cannot discharge the risk by pointing at its certifier.

Sector view

Where the exposure is concentrated

Product-level neutrality labelling became standard practice in a small number of consumer-facing categories: food and beverage, apparel and footwear, personal care, packaged goods, and increasingly hospitality and consumer electronics accessories. Those are the balance sheets exposed here. Business-to-business supply, industrial products and services sold to professional buyers are largely outside the consumer-practice perimeter, though national implementations vary — Germany, for instance, applies some misleading-practice rules to business-to-business dealings, while expressly limiting the future-performance claim requirements to consumer contexts.

Enforcement is by each member state's consumer authority, and the ceiling is meaningful: fines of up to 4% of the trader's annual turnover in the member state concerned, or more where national law sets a higher maximum. The relevant consumer rules also fall within the scope of the EU's Representative Actions Directive, which allows collective, class-action-style proceedings. A single non-compliant pack design sold across several member states is therefore exposed on more than one front.

The practical work is an inventory, not a strategy exercise: packaging artwork, e-commerce product detail pages, marketplace listings, point-of-sale material, brochures, vehicle liveries, and the claims embedded in retailer specifications and tender responses. Anything printed has a lead time, which is why the deadline has effectively already passed for physical packaging in production.

Supply side

What it does to credit demand

For project developers and credit suppliers, the demand consequence is specific rather than general. Offtakes justified by a customer's product-labelling programme lose their rationale in the EU, and those contracts were a real share of retail-facing voluntary demand between 2021 and 2024. Expect renewal conversations in consumer categories to stall or reprice.

What remains, and what the credible pitch now has to be built on, is threefold. Insetting inside the value chain is untouched, because the prohibition is specific to offsetting outside the product's value chain — which pushes attention toward supplier-level interventions and the emerging certification routes for them. Corporate-level contribution claims remain available where they are not attached to a product. And compliance-market demand — CORSIA, the EU ETS where credits are admitted, national schemes — is entirely outside the directive's perimeter.

Climate Decode's reading is that this accelerates a separation that was already visible: credits bought to make a marketing claim, and credits bought to meet an obligation or to fund mitigation the buyer accepts it cannot make a claim about. The first category is the one the EU has just closed at product level. Sellers whose pipeline was built on it should assume the European retail buyer does not come back in its previous form.

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