What the EU Empowering Consumers for the Green Transition Directive means for carbon credit claims

For years, a company and its customers could look at the same words, 'carbon neutral', and see two different things. A company might mean that it had compensated for a defined slice of its emissions, perhaps Scope 1 and Scope 2, or the footprint of a single product, using carbon credits. A consumer reading that label on the shelf could instead be likely to assume the whole business, or the whole product's value chain, produced no emissions at all.

That gap in understanding was not usually a case of companies trying to deceive people. Most were working from a genuine, if narrow, technical definition of carbon neutrality. But EU and UK studies of consumer perception have repeatedly found the same thing: shoppers read climate claims at face value, and 'neutral' sounds like 'zero', not 'offset elsewhere'. Multiply that gap across millions of purchasing decisions, and you get a market where the words on a label no longer do the job they are supposed to do.

The EU's answer was Directive (EU) 2024/825, the Empowering Consumers for the Green Transition Directive, known as the Green Transition Directive or EmpCo. Adopted on 28 February 2024, it amends two existing pieces of consumer law, the Unfair Commercial Practices Directive and the Consumer Rights Directive, and it is one of the most consequential pieces of anti-greenwashing legislation to reach the statute book anywhere in the world.

The directive comes into force later this month, on 27 September 2026, so we thought we’d break down what it means for European companies.

Why the directive exists

The Green Transition Directive was built to close the gap between what companies mean and what consumers hear. It says that environmental claims, particularly those about future performance such as reaching carbon or climate neutrality by a given date, can create the impression that buying a product contributes to a low-carbon economy. Where that impression is not backed by a credible plan, the directive treats it as misleading.

The directive doesn’t just apply to carbon claims. It also targets vaguer, everyday language: 'eco-friendly', 'green', 'environmentally friendly', 'climate friendly', 'energy efficient', 'biodegradable' and 'biobased' all fall within scope. And this doesn’t just apply to the EU. Consumers and regulators outside Europe have been asking the same questions of the same kinds of claims.

For example, Apple won a US court case over 'carbon neutral' claims on Apple Watch models in February 2026, after the judge dismissed the class action lawsuit against the company, but lost the German equivalent. 

What the directive covers

The Green Transition Directive applies to business-to-consumer commercial practices, which means any trader making environmental, social or durability-related claims to consumers in the EU, regardless of where that trader is based. 

Unlike the stalled Green Claims Directive, which had proposed carving out microenterprises, the Green Transition Directive contains no size or turnover threshold. It works by amending the Unfair Commercial Practices Directive, and that directive's obligations already apply broadly across the market. If your claims reach EU consumers, the rules apply to you.

What the directive actually bans

Article 6 of the Unfair Commercial Practices Directive now treats a product's environmental and social characteristics, alongside its circularity aspects such as durability, reparability and recyclability, as 'main characteristics' that a trader cannot misrepresent. 

A new Annex I also adds a list of practices that are unfair in all circumstances, without the need for a case-by-case assessment. Four of these are applicable to carbon credits:

A generic environmental claim, such as 'eco-friendly' or 'green', is banned unless the trader can demonstrate recognised excellent environmental performance behind it. This can be demonstrated through standards that are managed or recognised at the EU level, such as EU Ecolabels, which are managed by the European Commission, and environmental labels set by the International Standards Organizaton under ISO 14024.

An environmental claim about an entire product or an entire business is banned when it actually only reflects one aspect or one activity, such as an airline retiring credits against the emissions of a single route or aircraft type, then marketing 'fly carbon neutral with us' across its whole network.

A claim that a product has a neutral, reduced or positive climate impact based on offsetting greenhouse gas emissions is banned outright. This is the provision that affects carbon credit claims directly. 'Climate neutral', 'CO2 neutral certified', 'carbon positive' and similar wording can no longer be justified by offsetting alone. Such claims are only permissible where they reflect the product's actual lifecycle impact and direct decarbonisation mesures undertaken to reduce this, not the purchase of credits outside its value chain. The directive is careful to note however that this does not stop companies from advertising their investment in carbon credit projects, provided that investment is not framed as making the product itself neutral.

Finally, a self-declared or uncertified sustainability label is banned unless it is based on a genuine third-party certification scheme or established by a public authority.

Claims about future performance, such as a net-zero target for a given year, face a related but separate test under Article 6(2). These are only permitted where they rest on clear, objective, publicly available and verifiable commitments, set out in a detailed and realistic implementation plan with allocated resources, which are independently verified on a regular basis.

The directive comes into force on 27 September 2026. Penalty fines can reach 4% of a company’s annual turnover under the Unfair Commercial Practices Directive. Some EU member states are still in the process of transposing the directive into national law.

An example in practice: Green and climate-neutral gas tariffs from energy companies

The offsetting-based neutrality rules affect an established category of EU household energy products: blended ‘green gas’ tariffs. In Germany, for example, so-called ‘Ökogas’ tariffs typically combine renewable gas certificates with carbon credits to compensate for the emissions associated with the use of the gas. This combined product is then marketed to consumers using terms including ‘climate neutral’, ‘CO2 neutral’ or ‘climate positive’. 

Similar products have been offered at fuel pumps. Shell’s ‘Drive CO2 Neutral’ campaign offered UK and Dutch drivers the option to pay an extra cent per litre to fund forestry offset projects, marketed as making the fuel purchase itself carbon neutral. This, and subsequent wording changes to ‘CO2 compensation’, have been ruled misleading by the Dutch Advertising Code Commission.

Under the Green Transition Directive, describing products like these as ‘climate neutral’ or ‘carbon neutral’ falls under the same outright ban described above, because the offset-backed share doesn’t reflect reducing the product’s own direct lifecycle emissions – it compensates for them elsewhere. 

It’s important to note that this doesn’t rule offsets, renewable energy certificates or other environmental attribute certificates out of a product’s design, it means the claim needs to change. 

A company can still buy renewable gas certificates to back a renewable-content claim, and can still fund and communicate its carbon credit projects separately, but combining either of these with an outright neutrality claim is no longer permitted.

What about the Green Claims Directive?

The Green Claims Directive was meant to follow the Green Transition Directive, setting out the detailed methodologies and certification requirements that would let companies prove their claims, potentially including a requirement to use carbon credits from the EU's Carbon Removals and Carbon Farming (CRCF) mechanism for certain claims. It was tabled in June 2025, caught in a wider push and pull between member states over the EU's competitiveness agenda alongside CBAM and the Corporate Sustainability Reporting Directive. 

Its absence leaves companies with more room to interpret the Green Transition Directive's principles, and more freedom over the types of credits they use to back a contribution claim, but it also leaves more uncertainty about what a regulator or court will consider sufficient proof.

How carbon credit claims are regulated around the world

The Green Transition Directive is the most detailed and most binding piece of law in this space, but it is not alone. Rules on carbon credit and climate claims tend to sit in one, or sometimes confusingly all three, of consumer protection law, competition law and advertising standards. The table below outlines the state of play.

The pattern across all of these regimes is the same: regulators want claims that are specific, evidenced and lifecycle-based, and they are increasingly sceptical of anything that leans on offsetting alone to justify a neutrality or net-zero claim.

What claims can you actually make?

Two broad paths exist for companies that want to keep making carbon credit-related claims once the Green Transition Directive applies.

The first is to have compensation claims – those that are based around using carbon credits to offset a company's emissions impact – verified by a body recognised under the directive's framework, for example under an ISO-aligned certification scheme. This means also accepting the narrower conditions that now attach to any claim of neutrality: lifecycle-based evidence, and no reliance on offsetting outside the product's value chain.

Abatable's preference is the second path: contribution claims. Rather than asserting neutrality, under a contribution claim a company is transparent about the separate roles played by value chain emission reductions and investing in carbon avoidance credits and carbon removals. Under this approach, the company communicates clearly where it stands today, where it plans to get to, for example a net-zero target for a defined year, and what quality criteria govern the credits it uses to take responsibility for its ongoing emissions in the meantime. 

This approach sits comfortably alongside where the market's own standards are heading. SBTi's Corporate Net-Zero Standard V2.0, published in June 2026, introduces an Ongoing Emissions Responsibility (OER) programme that formally recognises companies for supporting high-integrity credits and removals against their ongoing emissions, separately from their validated reduction targets. A contribution-based claim, built on transparency rather than a single compressed word like 'neutral', is naturally aligned with that direction, and it tends to hold up better under regulatory and public scrutiny than a claim that asks one word to carry too much weight.

How Abatable can help

Getting this right, across a growing patchwork of EU, UK and global rules, means working through the specifics of your claims, your credit portfolio and your target-setting framework together, not treating them as separate exercises. Abatable advises companies on building climate claims that are transparent, well-substantiated and ready for regulatory scrutiny: from project due diligence through to the wording that ends up on the page.

For more detail on how to structure contribution claims and build a defensible net-zero portfolio, see Abatable's net-zero portfolio guides, How to structure your carbon portfolio under new net-zero standards and How to build a resilient carbon removals portfolio. And get in touch with us if we can help further.