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Glossary · Energy industry & energy transition

Greenwashing

Greenwashing Carbon footprint sustainability communication Green power regulation

Greenwashing refers to the misleading presentation of products, companies, services or policy measures as more environmentally friendly, climate-friendly or sustainable than can be verified. In the power system, the term mainly concerns claims about green electricity, climate neutrality, emissions reduction, offset certificates, corporate balances and investments in renewable energy. Greenwashing does not require an outright lie. It can arise even when a statement is partly true but omits important system boundaries, points in time, quantities or effects.

What matters is the gap between the impression a statement creates and the facts that can be substantiated. This gap cannot always be expressed in numbers, for example in the case of images, colours or vague terms. Anyone who describes an electricity tariff as "100 percent green" can mean very different things: electricity directly from specific renewable plants, an accounting allocation via guarantees of origin, the financing of new plants, purchasing on the power exchange plus certificates booked afterwards, or a mixture of these. To customers, these sound similar. For the effect on the power system, it makes a big difference.

Guarantees of origin: accounting allocation instead of physical delivery

For electricity, guarantees of origin play a central role. They certify that a certain quantity of electricity was generated from renewable sources, and they are cancelled when delivered to end customers. However, they do not prove that precisely this electricity reached the customer. Electricity flows through the grid according to the laws of physics, not according to contract labels. The certificate allocates the environmental attribute only in accounting terms. This is technically correct and provided for by law. It becomes misleading when advertising creates the impression that the customer is supplied directly from a specific wind, solar or hydropower plant. It is equally misleading if it suggests the construction of new plants although only certificates from long-existing plants are purchased. The question of whether an offer stimulates additional renewable generation is discussed under the term additionality.

Accounting boundaries and carbon footprints

Greenwashing is closely linked to the carbon footprint. How meaningful a footprint is depends on which emission sources it includes: direct emissions at the company's own site, emissions from purchased energy and emissions along the supply chain yield very different results. For purchased electricity, the method alone makes a big difference. A market-based footprint under Scope 2 market-based uses contractual instruments such as guarantees of origin. A location-based footprint uses the average mix in the grid area. Anyone who states only the more favourable figure or silently omits Scope 3 emissions from inputs, transport and use appears more climate-friendly than they are. The problem is then often not a wrong figure but an accounting boundary that is too narrow and that nobody discloses.

Temporal matching

In the power system, it matters in particular when electricity is generated and when it is consumed. Over a year, a company can purchase, in accounting terms, as much renewable electricity as it consumes. This does not mean, however, that its consumption is covered by renewable generation in every hour. Wind and solar power fluctuate. If consumption often falls in hours with a lot of fossil generation, the hourly impact looks different from what the annual balance suggests. For the question of which power plants actually run more or less because of additional or shifted consumption, the marginal emission factor is more informative than an annual average. Annual balances are therefore not worthless. They merely answer a different question than hourly matching, and an advertising claim should make clear which question is meant.

Climate neutrality and offsetting

Claims about climate neutrality are particularly vulnerable. Products were often described as climate neutral when their calculated emissions were offset by compensation certificates from projects outside the company's own value chain. Such certificates can finance climate action if they bring about additional, permanent and verified reductions. Their quality, however, varies greatly. On 27 June 2024, the Federal Court of Justice (Bundesgerichtshof) ruled (I ZR 98/23) that advertising with an ambiguous environmental term such as "climate neutral" is, as a rule, permissible only if its specific meaning is explained in the advertisement itself. A reference to an external website was not sufficient. The court justified this in part by stating that reduction and offsetting are not equivalent and that reduction takes priority for climate protection.

Legal framework in the EU and Germany (as of November 2026)

Directive (EU) 2024/825 on empowering consumers for the green transition (EmpCo for short) tightened the EU Unfair Commercial Practices Directive. In Germany, it was implemented by an amendment to the Act against Unfair Competition (UWG) of 12 February 2026, promulgated in the Federal Law Gazette (Bundesgesetzblatt) 2026 I No. 43. The new requirements have applied since 27 September 2026. They are aimed at commercial practices towards consumers. Key points for the energy industry are:

  • Ban on offsetting-based product claims: A product may not be advertised as climate neutral, CO2 neutral, "with climate offsetting" or reduced in emissions if the claim rests on offsetting greenhouse gas emissions outside the value chain. Goods and services count as products, so this also includes, for example, electricity and gas tariffs. Companies may continue to report on their investments in climate protection projects, as long as this is not misleading.

  • General environmental claims such as "green", "environmentally friendly" or "climate-friendly" are prohibited without recognised excellent environmental performance. This does not apply if the claim is specified clearly and prominently in the same medium. The directive itself gives an example: stating that 100 percent of the energy used for production comes from renewable sources is a specific claim. It must nevertheless be true and must not be misleading.

  • Part presented as the whole: An environmental claim about the entire product or the entire business is prohibited if it concerns only a part. The directive gives an example from the energy sector: a company that creates the impression of using exclusively renewable energy although many of its plants continue to run on fossil fuels.

  • Future targets: Claims about future climate neutrality or similar targets are, following a case-by-case assessment, misleading if they lack clear, publicly available and verifiable commitments. What is required is a realistic implementation plan with resources and milestones, which an independent expert reviews regularly.

  • Sustainability labels are permissible only if they are based on a certification scheme with independent monitoring or were established by public authorities. Statutory obligations that apply to all products of a category may not be advertised as a special feature of one's own offer.

The planned EU directive on explicit environmental claims (Green Claims Directive) was intended to require prior substantiation and external verification. It is not in force. The Commission announced in June 2025 that it intended to withdraw the proposal, and the final trilogue negotiations were suspended. Besides unfair competition law, energy suppliers in Germany are subject to separate rules on electricity labelling and on the use of guarantees of origin. For corporate disclosures, requirements on sustainability reporting and the EU Taxonomy also apply. How the new UWG rules will be applied in detail to green electricity tariffs with guarantees of origin remains to be clarified by courts and supervisory practice.

Distinctions: simplification, uncertainty, deception

Not every abbreviated statement is greenwashing. Energy-industry matters are complex, and every balance rests on assumptions. A simplification becomes problematic when it systematically leads the addressees to a wrong assessment. A statement can be legally permissible and still technically weak. Conversely, a company can seriously decarbonise and still communicate imprecisely. Legally, what matters in unfair competition law is above all the overall impression on the relevant public addressed, not an intent to deceive. Greenwashing is also not the same as a low environmental standard. A product can be legal, transparent and still not very ambitious. It becomes greenwashing only when its environmental performance is presented as better than can be substantiated. Sustainability, in turn, is a broad evaluation framework with ecological, social and economic aspects. Greenwashing refers to the misleading presentation within such a framework.

Why greenwashing distorts the electricity market

Trust has an economic function in the electricity market. Households, companies and public purchasers decide on the basis of information that they can hardly verify themselves. If green attributes cannot be reliably distinguished, high-quality offers lose their advantage. A tariff or a corporate PPA that actually finances new plants or matches consumption in time with renewable generation then competes with offers that use cheap certificates and sound similar. Demand thus does not necessarily shift to the most effective solutions but to the most convincing labels. The cause often lies less in poor communication than in incentives. The less clear the criteria, the more it pays to claim a lot of environmental impact while bearing few switching costs.

Greenwashing also obscures the difference between the accounts of an individual company and the physical impact on the system. A company can reduce its calculated emissions without any change in power plant dispatch in the grid. A real system impact is more likely to arise when additional build-out is incentivised, fossil generation is displaced, consumption is controlled more flexibly, efficiency is improved or grid integration is made easier. These effects cannot always be attributed to an individual customer. This is precisely why accurate terms are important.

Features of robust green electricity claims

For the energy transition, the term has a practical function: it forces claims about green impact to be linked to system boundaries, quantities, points in time and evidence. A robust green electricity promise answers at least these questions: Which quantity of energy is meant? From which plants does it originate in accounting terms, and how old are they? Is additional generation incentivised? How are temporal deviations handled? Which emissions remain, and by which method were they calculated? Greenwashing begins where these distinctions are omitted in such a way that a limited accounting allocation creates the impression of a comprehensive environmental impact.

Sources

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Edited by eCMS on 12.11.2026 05:05

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