Decree on Carbon Neutrality of Products: Chronicle of a Misguided Ambition

The Decree on Carbon Offsetting and Claims of Carbon Neutrality in Advertising took effect on January 1, 2023. What are the key takeaways? This article provides a brief history of the development of the law and its implementing decree, as well as an analysis of the potential impact of this regulatory provision.

A Brief History of the Adoption of the “Carbon Neutrality of Products” Act

In its initial 2021 version, the Climate and Resilience Act called for an outright ban on claims of carbon neutrality and, more generally, “on asserting in advertising that a product or service is carbon neutral, has no negative impact on the climate, or any other wording with a similar purpose and meaning.” This ban was based on theADEME's official statement on carbon neutrality (April 2021), which held that the planet and nation-states were the only entities that could scientifically claim to be carbon-neutral. The Senate subsequently amended the provision slightly to provide for exceptions for claims based on “certifications grounded in norms and standards recognized at the French, European, and international levels.”

Then, to everyone's surprise, the Climate Bill was referred to the Joint Committee in late July 2021 has profoundly transformed the text, to the point of making it unrecognizable. The law thus evolved from a ban into a conditional authorization. The criteria that must be met to be allowed to claim that a product is carbon-neutral were modeled on the “Measure-Reduce-Offset” approach, a three-step process created during the era of the now-defunct Kyoto Protocol (1997). The law stipulates that a company may label any of its products or services as “carbon neutral” as long as it makes the following information available to the public:

“1. A greenhouse gas emissions inventory that includes both direct and indirect emissions from the product or service;

(2) The approach whereby greenhouse gas emissions from the product or service are first avoided, then reduced, and finally offset. The greenhouse gas emissions reduction trajectory is described using quantified annual progress targets;

(3) The procedures for offsetting residual greenhouse gas emissions in accordance with minimum standards established by decree.”

It was in this form that the bill was finally adopted in late July 2021, marking a significant scaling back of its scope compared to the original text and a clear contradiction with ADEME’s opinion on the same subject.

All that remained was to establish the exact criteria for applying this law: that is the purpose of the decree that took effect on January 1.

The implementing decree fails to raise the bar

A draft decree implementing the law on the regulation of carbon-neutral claims was first submitted for public consultation in early 2022, and was finally enacted on April 13, 2022, setting the effective date as January 1, 2023.

As a mere executive order, this text could not remedy all the flaws in the law that had already been adopted, such as its departure from the original intent of the bill (a shift from a ban on the claim to conditional authorization), the use of the highly criticized concept of “carbon offsetting” (since emissions can never be “canceled”), or the absurdity of the notion of reducing a product’s emissions (since an object, unlike a company or a government, can hardly reduce its emissions). On the other hand, the decree could have set sufficiently high standards for each of the law’s criteria to ensure the necessary safeguards were in place.

Unfortunately, the criteria set forth in the decree fall far short of what is needed. For example, although the text calls for calculating the total emissions of the product in question, it merely requires the establishment of a “reduction trajectory” for those emissions, without mandating a minimum rate of reduction. However, the Paris Agreement requires that global emissions be reduced by 5% to 7% per year.

Another clear example of a lack of ambition: the company loses its right to claim carbon neutrality “if it is found that the emissions associated with the product or service, before offsetting, have increased between two consecutive years.” However, it would have seemed logical for that right to be revoked as soon as the emissions associated with that product were reduced doesn't go as fast than what the company's cost-cutting plan had called for.

In a previous article, Carbone 4 had pointed out that this text implicitly allowed for the existence of “carbon-neutral” vehicles, even though this clearly contradicts the objectives of the Paris Agreement. For example, an extremely gas-guzzling SUV could easily become “carbon-neutral” while strictly complying with the law, as long as the manufacturer reports the vehicle’s total emissions, commits to reducing them in the future (without any obligation to achieve specific results or set ambitious targets), and offsets the total (including with credits priced at 10 euro cents per metric ton). It is worth noting that between 2010 and 2021, SUVs were the second-leading cause of the increase in global emissions.

The previous example shows that to achieve a genuine transformation of our technical environment—the only way to drastically reduce our emissions—it would be far more effective to start by assessing the degree to which a given product aligns with the 1.5°C goal (as proposed by Carbone 4 with its Paris Agreement Compatibility Score) rather than allowing economic actors to make baseless, meaningless claims about products that are incompatible with the transition.

Given the public’s legitimate skepticism regarding claims of carbon neutrality, the associated litigation risks, and the significant effort required to gather the necessary information to achieve compliance, it seems likely that many companies will prefer to adopt more honest communications aligned with science, such as those proposed by the SBTi, ADEME, or the Net Zero Initiative. It is regrettable that the government missed such a great opportunity to help businesses begin thinking about the resilience of their products and services in light of the national climate strategy.