Unlocking Carbon Market Demand: How Safe Harbors Can Protect Corporations from Greenwashing Risk
3 May 2026
Published: May 2026 · Last updated: May 2026
Authors: Dr. Ruth Dagan, Partner and Head of the Environment and Climate Change practice at Herzog Fox & Neeman, and Co-Chair of the IETA Legal Working Group; and Hanni Maoz, Associate in the firm’s Environment and Climate Change practice, advising on sustainable finance, carbon trading, climate-related regulation, and ESG matters.
A safe harbor for corporate green claims is a legal mechanism that protects companies from greenwashing liability when they purchase and retire verified carbon credits following established quality and disclosure standards. As greenwashing litigation surges globally – increasing 70% between 2022 and 2024 – safe harbors could unlock significant corporate demand in the voluntary carbon market.
We are pleased to share a comprehensive legal report released by Herzog’s Environment and Climate Change practice, titled “Unlocking Demand in Carbon Markets through Safe Harbors for Corporate Green Claims.”
As global corporations face a surge in greenwashing litigation, our report provides a strategic roadmap for navigating the legal uncertainties currently stifling the Voluntary Carbon Market (VCM). While carbon markets are essential for private climate finance, mounting legal risks, even when using verified credits, are constraining their growth and exposing companies to unprecedented regulatory enforcement. Our analysis supports global efforts by IETA and the Coalition for Carbon Market Integrity to create a unified, high-integrity market.
According to Dr. Ruth Dagan, Co-Chair of the IETA Legal Working Group: “Safe harbor mechanisms focused on credit integrity alone are insufficient.”
Our report highlights:
- The Dual-Layer Risk: Why legal exposure now stems from both credit integrity (quality) and claim integrity (how achievements are communicated).
- The “Net Impression” Standard: Insights from recent case law (such as DUH v. Apple and Berrin v. Delta Air Lines) showing how courts evaluate claims beyond their technical merits.
“Courts have consistently held that liability may arise from the way claims are framed,” Dr. Dagan explains.
- The Safe Harbor Solution: A proposed “two-track” approach to mitigate risk, from immediate administrative guidance to long-term statutory legislation.
- Global Regulatory Mapping: An analysis of international frameworks, including the EU EmpCo Directive, U.S. FTC Green Guides, and Swiss FOEN Enforcement Aid.
Amid the shifting landscape of climate litigation, establishing clear “safe harbors” is critical to building the confidence necessary to unlock the full potential of carbon finance.
Executive Summary
Carbon markets hold significant potential as instruments of private climate finance, but their growth is increasingly constrained by legal uncertainty. Companies making climate-related claims based on carbon credits face mounting exposure to regulatory enforcement and civil litigation, even where the underlying credits have been independently verified by leading certification programmes. This litigation risk suppresses demand for high-integrity credits and frustrates the market’s core purpose.
This paper focuses on the voluntary carbon market (VCM) and does not address compliance markets or mandatory emissions trading schemes. It also does not address Article 6 markets specifically, though many of the legal principles discussed are of potential relevance to corporate claims based on Article 6-connected credits.
Soft standards addressing both credit integrity and claim wording can provide actionable guidance ahead of statutory developments.
The paper analyses the legal architecture of safe harbor mechanisms and their application to carbon credit-based environmental marketing. The core analytical finding is that legal exposure in carbon markets arises from two distinct sources: credit integrity — the methodological and governance quality of the underlying credits — and claim integrity — the accuracy, scope, and consumer impression of the claim itself. Safe harbor mechanisms focused on credit integrity alone are insufficient. Courts have consistently held that liability may arise from the way claims are framed, independent of the quality of the credits relied upon to make these claims.
The application of safe harbor mechanisms specifically to carbon credit-based corporate claims is an emerging and largely undeveloped area of law. To our knowledge as of today, no jurisdiction has enacted such a mechanism. The sole legislative proposal of this kind which we have currently identified in the public domain is California Assembly Bill 1911 (introduced February 2026) which could create a statutory defense against misleading environmental marketing claims where the claim is based on credits from a qualifying programme. This model provides a template for future jurisdictional adoption.
This paper surveys the broader regulatory landscape governing environmental marketing claims. The EU EmpCo Directive, the FTC Green Guides, the Swiss FOEN Enforcement Aid, the ICC Environmental Marketing Framework, and the Gold Standard Claims Guidelines establish a standard of care for how climate claims should be structured, qualified, and communicated. None of these instruments is a safe harbor: they do not confer immunity from legal proceedings. However, they represent the kind of instrument that a jurisdiction could formally adopt as official guidance in the context of carbon credits, signaling that enforcement action is unlikely where a company has structured its claims in accordance with the framework’s standards, representing an actionable near-term pathway that does not require legislation.
The path forward requires action on two tracks. In the near term, soft standards addressing both credit integrity and claim wording can provide actionable guidance ahead of statutory developments, and jurisdictions should be encouraged to formally adopt such standards as soft safe harbors, providing market participants with credible enforcement predictability. In the long term, a model statutory safe harbor standard — building on AB 1911 while incorporating claim-side lessons from the U.S., EU and Swiss frameworks — should be developed for adoption across jurisdictions.
Ultimately, this exercise is targeted at unlocking demand for carbon credits by designing a clear, predictable path for corporations to utilize these instruments while mitigating the legal and regulatory exposure typically associated with climate-related claims.
Download Full Report >> click here
Related Carbon Market Insights:
• De-risking Carbon Markets: Managing Legal Uncertainty in Carbon Credits
• Dr. Ruth Dagan Appointed Co-Chair of IETA Legal Working Group
