The challenges of carbon neutrality labeling in China

In China, while you sit in a carbon-neutral building, drink a carbon-neutral coffee with carbon-neutral milk, and eat your carbon-neutral mooncake, open your carbon-neutral computer and arrange for delivery from a parcel to a carbon neutral locker. Then you walk to your car, powered by a carbon neutral battery, and drive to the airport to catch your carbon neutral flight to a carbon neutral event… But are you really being carbon neutral?

“Carbon neutrality” is achieved when the CO2 released into the atmosphere by an activity is successfully offset by equivalent CO2 removal. If an individual, company or country can remove as much CO2 from the atmosphere as it emits, then it is carbon neutral.

The term has become a buzzword in China, with many “carbon neutral” products on the horizon. But the label and claims about it have been criticized. Are the claims made about these products genuine or is it just greenwashing?

Other countries have taken action: in June, Canada passed a law preventing companies from making unfounded environmental claims, including dubious ones about carbon neutrality; In March, the EU sent an even clearer message, banning all environmental claims based on greenhouse gas offsets.

China’s carbon-neutral products claim such status based on offsets. Products or services have long been able to obtain carbon neutral certification from environmental testing institutions, certification providers and industry associations. But in April this year, the government banned the use of certain words, such as “verified,” in carbon certification.

On October 1, China began implementing national general standards for product carbon footprint accounting. This will lead to the preparation of accounting standards for various products. Carbon labels, including carbon neutrality labels, will also become more standardised.

Goodbye to carbon neutrality labels?

In China, the use of the term “verified” is restricted. In April, certification authorities clarified that carbon labeling schemes must be registered. It was stipulated that carbon disclosures and neutrality claims for products, services and management systems should not use terms such as “approved”, “vetted” or “verified”.

Carbon neutrality labels are a subcategory of carbon labeling. Information about emissions is presented in quantities or degrees, so that consumers can make decisions with a lower carbon impact. The US, UK, EU and Japan all have carbon labeling schemes.

China is still exploring and testing the possibilities of carbon labeling, and there is no applicable legislation yet. According to the official newspaper of the National Energy Administration, China Energy Newsthe country has 1,400 approved certification bodies, covering a wide range of products. For example, carbon management solutions provider Carbonstop has an online shopping platform that lists more than 300 low-carbon products, from pet care to personal care. However, the lack of norms and standards means that the quality of certification is uneven.

As mentioned, unlike China, the EU is saying goodbye to carbon-neutral product claims that rely on offsetting. The bloc enacted a new directive in March called Empowering Consumers for the Green Transition. This prohibits claims that a product or service has a neutral or positive impact on carbon emissions if those claims are based on offsetting. EU member states now have two years to incorporate the directive into their national laws.

A Chinese expert told Dialogue Earth confidentially: “Many companies claim to be net zero, zero carbon or carbon neutral, but there are so many loopholes that the consumer is misled. “The EU directive will mean that only claims based on environmental impacts over the life cycle of the product will be allowed.”

Under the new directive, not only the term “carbon neutral” will be banned: terms such as “environmentally friendly”, “climate friendly”, “carbon friendly”, “carbon positive” and other expressions Vague acts will be subject to investigation and possible sanction.

Compensation debates and greenwashing concerns

The concerns raised about carbon neutrality boil down to questions about carbon offsetting through carbon credits.

Although there are restrictions, such as the requirement that a carbon credit be canceled once it has been used for offsetting, the lack of transparency and double counting have led to global offsetting scandals. In 2023, 90% of rainforest carbon offset projects managed by Verra (the world’s largest certifier of carbon offsets) were revealed to be worthless; That same year, the world’s largest carbon trader, South Pole, was accused of exaggerating the results of its projects. Among the clients of these companies are large emitters such as oil and aviation firms, as well as well-known consulting and consumer brands.

All of this has inevitably damaged the reputation of carbon offsetting; Many companies that had claimed that their products or activities were carbon neutral were accused of greenwashing. As early as 2007, some were warning that offsets were nothing more than “modern indulgences” that would do nothing to benefit the climate.

The controversy over carbon neutrality has also affected labeling and claims. In 2012, a UK consultancy called Carbon Trust launched a carbon neutrality labeling scheme. In 2023, this was replaced by a carbon footprint label, along with promises of “a greater emphasis on reduction, more ambitious requirements and more information on the claim.”

As mentioned, products and services in China also claim to be carbon neutral by resorting to offsets. These offsets are often purchased as China Certified Emission Reductions (CCER), which are carbon credits certified by the government. The CCER scheme, which is voluntary, was suspended between 2017 and January 2024, partly due to fraudulent data and a lack of transparency. Today, China’s voluntary carbon market is overseen by the Ministry of Ecology and Environment. This stricter oversight means that, at least in theory, the data is of better quality.

There are no such rules for carbon neutrality claims. This means that many of them depend on various standards for their compensation, such as those of the CCER scheme and the Clean Development Mechanism (CDM) of the UN. The April statement from certification authorities in China recommends the use of international, national and industry standards. It stipulates that “other emissions reduction mechanisms, such as CCER, CDM, [Verified Carbon Standard] and [Gold Standard]should not be used alone. In other words, simply purchasing carbon credits does not mean you can describe yourself or your product as carbon neutral.

Will carbon neutrality certification continue in China?

“The EU is not ending carbon neutrality,” clarifies our expert, who spoke on condition of anonymity. “There is no problem with being carbon neutral. The problem is the lack of standards and tests. “The EU wants to prevent people from labeling themselves carbon neutral without a basis for doing so.”

In China, carbon neutral certification for companies and products can continue: there is no mention in the April statement of banning terms like “certificate” or “declaration.”

Ouyang Cheng, Consulting Director at Carbonstop, believes that carbon neutral product labels have their own importance:

“If a product is marked with a 10g carbon footprint, that might not mean much to a consumer, and will have a limited impact on increasing sales. However, if consumers are told it is low carbon or carbon neutral, they are willing to pay for it. “With positive feedback from consumers, businesses will be more motivated to invest in carbon neutrality, and the low-carbon transformation will have more talent, technology and financial support.”

In both China and the EU, carbon neutrality labeling and stricter management of offset-based claims have created uncertainty for voluntary carbon markets. Since the carbon credits purchased to support those claims come from voluntary markets, our anonymous expert reflects: “EU regulations block the further use of carbon offsets in the voluntary emissions reduction market. Will it be a turning point in the development of the voluntary carbon market? “Will it have an indirect psychological impact on China’s CCER?”

Carbon footprint accounting needs to catch up

Carbon labeling, including neutrality labels, shows the results of carbon accounting in a way that is easy for consumers to understand. Regardless of the words or forms used, carbon footprint accounting remains crucial.

This is something developed countries started earlier, building authoritative databases of emissions factors and carbon accounting standards. However, China is just getting started. As experts have explained, the EU carbon tax (known as the Carbon Border Adjustment Mechanism) and sustainability requirements for products (such as the carbon footprint of electric vehicle batteries) are two important measures that promote a system of global carbon standards linked to trade. Both require disclosure and accounting of carbon footprints. Therefore, mutual recognition of standards in these processes, with the EU and other trading partners, is an essential consideration for Chinese companies working in these markets, and a current source of difficulties.

China is working to align its own carbon footprint accounting system with those of other countries. That system will begin to take shape in 2027, by which time carbon accounting standards will have been established for approximately 100 key products. By 2025, China will have rules and standards in place to calculate a product’s carbon footprint, as well as a database of those footprints. That will allow a single system for verification and labeling.

Experts note that this standardization of carbon neutrality and other carbon labels needs to happen first, since it is such a large and complex system. The hope, they add, is that initially focusing on the labels will lead to success in building the rest of the system.

Note: this is an article republished from the media “Dialogue Earth” through a cooperation agreement between both parties for the dissemination of journalistic content. Original link.

Consulting editor on China at China Dialogue. He has worked in several international and Chinese NGOs focused on the environment, communication and civil society.