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Electric vehicles’ green credentials under scrutiny with EU’s Green Claims Directive

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The European Union is negotiating a new law, the Green Claims Directive, to combat greenwashing and help consumers make more environmentally conscious choices. The proposal imposes strict regulations on how businesses can market their environmental claims. Notably, it suggests that electric vehicles, often seen as a green alternative, may not be allowed to be advertised as environmentally friendly.

As concerns over climate change increase, there has been a surge in consumer interest in supporting businesses and products that are seen as eco-friendly. This trend, along with pressure from investors and other stakeholders, has pushed businesses to adopt green stances. However, there is growing concern that some businesses are exaggerating their green credentials in a practice known as greenwashing.

Traditionally, greenwashing involved misleading marketing to make companies appear more environmentally friendly than they actually were. Recently, the term “climate washing” has emerged, specifically referring to the exaggeration of claims related to climate change and greenhouse gas emissions. For years, environmental activists have criticized greenwashing for hindering genuine corporate environmental action. As environmental, social, and governance (ESG) investing has grown, so have the legal risks associated with greenwashing, moving beyond deceptive marketing to misleading investors and violating consumer protection laws.

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The regulatory landscape around greenwashing has been sparse, but this is changing with climate-related regulations driven by the Paris Agreement. In February, the EU adopted the Directive on Empowering Consumers for the Green Transition, which targets green and climate-related claims. On June 18, the Council of the European Union announced its position on the Green Claims Directive, which is stricter and intended to complement the Empowering Consumers Directive. The adoption of this position marks the first stage of negotiations between the Council and the European Parliament to finalize the Directive’s language.

The Council’s position on the Green Claims Directive states that if environmental claims are not reliable, comparable, and verifiable, consumers cannot make informed decisions to support better environmental practices. It would be misleading if environmental claims or labels highlighted benefits while ignoring negative trade-offs in other environmental aspects. This poses a challenge for electric vehicles, as it could expose their environmental shortcomings.

The Paris Agreement aims for net-zero greenhouse gas emissions by 2050, with the transition from combustion engine vehicles to electric vehicles being a prominent strategy. Governments, including the EU, have set policies to achieve this by 2035. While electric vehicles reduce GHG emissions, their environmental impact, particularly from the mining of rare minerals like cobalt and lithium for batteries, has been criticized by human rights advocates and environmentalists. Critics argue that the environmental damage from mining outweighs the benefits, while climate activists believe it is necessary to achieve net-zero emissions.

Conservatives criticize electric vehicles as mere “climate theater,” arguing that they allow individuals to appear environmentally conscious without making significant lifestyle changes. They also contend that the electricity used to charge these vehicles is often generated from fossil fuels, though supporters counter that electric vehicles still result in a net reduction in GHG emissions.

Despite their environmental issues, electric vehicles are commonly marketed as “green” and “environmentally friendly.” Under the proposed Green Claims Directive, they may no longer be able to make these claims, which would be a significant setback for advocates of electric vehicles.

There is potential for an exemption for electric vehicles in the final Directive. The current proposal exempts claims about the availability of consumer information on fuel economy and CO2 emissions for new passenger cars, but this does not seem to cover broader marketing claims.

Notably, the European People’s Party, which has gained seats in the recent EU elections partly due to its criticism of green policies and the European Green Deal, aims to delay and amend the 2035 phase-out of combustion engines. Requiring automakers to disclose the full environmental impact of their vehicles may support their stance.

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