EnergyAustralia has been accused of falsely claiming that its Go Neutral product would have a positive impact on the environment when the firm knew it was generated by "polluting" fossil fuels.
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While the energy supplier has marketed Go Neutral as a way for consumers to go "carbon neutral", the electricity supplied is still created by coal or natural gas, using carbon offsets to "cancel out the emissions".
In a Federal Court lawsuit filed Wednesday, charity Australian Parents for Climate Action said these claims had misled more than 400,000 customers about the climate impact of the product.
"Australian parents want our energy to be clean and renewable, because our children rely on us to create a safe and sustainable world for their future," said AP4CA CEO Nic Seton.
"We've had enough of power companies misleading us into buying polluting products. So we're taking a stand against EnergyAustralia's greenwashing on behalf of Australia's parents and our children."
Offsets were a form of "marketing spin based on creative accounting" and were fundamentally deceptive, Mr Seton said.
Equity Generation Lawyers, the law firm representing AP4CA, said this was the first civil lawsuit to be filed in Australia over a product marketed as carbon neutral.
"If our client is successful, it will force EnergyAustralia to stop claiming that its 'Go Neutral' product is 'carbon neutral'," said senior associate David Hertzberg.
"It will also set a precedent for other companies, helping to strip back some of the greenwashing faced by everyday consumers."
AP4CA are seeking court declarations and injunctions barring EnergyAustralia from making misleading statements in future.
A spokesperson for EnergyAustralia said its Go Neutral product complied with the federal government's Climate Active certification process to drive voluntary climate action.
"EnergyAustralia is disappointed that the Australian Parents for Climate Action group has chosen to commence court proceedings rather than engaging with EnergyAustralia to share ideas about ways to ensure that consumers can make informed choices," they said.
"EnergyAustralia denies the allegations of misleading or deceptive conduct in relation to our Go Neutral and PureEnergy products and intends to defend the proceeding."
According to a report by the federal Clean Energy regulator released in February this year, EnergyAustralia was the third highest emitter in 2021/22, producing 16.2 million tonnes of carbon emissions.
A total of 310 million tonnes of carbon were emitted nationwide during that period.
EnergyAustralia has 1.6 million customers across Australia and operates two coal-fired and four gas-fired power plants in NSW, Victoria and South Australia.
Australian Associated Press
