Greenwashing and Carbon Offsets: An Unresolved Regulatory Intersection. Legal framework around Greenwashing using Carbon Offsetting

Abstract

Greenwashing and carbon offsetting intersect in complex and consequential ways. This paper examines whether the existing regulatory framework adequately addresses greenwashing through carbon offsetting, with a comparative focus on the European Union and India. Carbon offsetting allows entities to claim climate neutrality by financing emission reductions elsewhere, but it is frequently misused through vague claims, phantom credits, and insufficient disclosure. Drawing on legal cases, independent investigation reports, and a critical analysis of regulations, including the EU's Empowering Consumers for the Green Transition Directive, the Corporate Sustainability Reporting Directive (CSRD), European Sustainability Reporting Standards (ESRS), India's Greenwashing Guidelines 2024, and the Carbon Credit Trading Scheme (CCTS), the paper evaluates how effectively these frameworks address the core concerns. The analysis finds that while the EU has developed a more granular disclosure-based regime, India's broader prohibitory approach has potential but requires further specificity. Both jurisdictions would benefit from stronger enforcement, standardized methodologies, and clearer provisions on offset quality and timing. The paper concludes that carbon offsetting can contribute to genuine climate finance if underpinned by a robust, transparent, and enforceable regulatory architecture.

Greenwashing and carbon offsetting intersect in complex and consequential ways. This paper examines whether the existing regulatory framework adequately addresses greenwashing through carbon offsetting, with a comparative focus on the European Union and India. Carbon offsetting allows entities to claim climate neutrality by financing emission reductions elsewhere, but it is frequently misused through vague claims, phantom credits, and insufficient disclosure. Drawing on legal cases, independent investigation reports, and a critical analysis of regulations, including the EU's Empowering Consumers for the Green Transition Directive, the Corporate Sustainability Reporting Directive (CSRD), European Sustainability Reporting Standards (ESRS), India's Greenwashing Guidelines 2024, and the Carbon Credit Trading Scheme (CCTS), the paper evaluates how effectively these frameworks address the core concerns. The analysis finds that while the EU has developed a more granular disclosure-based regime, India's broader prohibitory approach has potential but requires further specificity. Both jurisdictions would benefit from stronger enforcement, standardized methodologies, and clearer provisions on offset quality and timing. The paper concludes that carbon offsetting can contribute to genuine climate finance if underpinned by a robust, transparent, and enforceable regulatory architecture.

Keywords: greenwashing, carbon credits, climate neutrality, CCTS, ESG disclosure, comparative law