Avoided Emissions Claims and the ACCC: What Australian Companies Can and Cannot Say in 2026

Sell a wind turbine, claim the coal generation it displaced. Sell software that takes business travel out of a sales cycle, claim the avoided flight emissions. Sell low-carbon cement, claim the difference against Portland clinker. These are avoided emissions claims, and they have become one of the most attractive marketing numbers in Australian sustainability reporting because the figure is almost always larger than the company's own inventory.

A 50-megawatt wind farm might emit a few hundred tonnes of CO2-e a year from maintenance vehicles and SF6 in switchgear. The avoided emissions claim against the Queensland grid average can come in at over 200,000 tonnes. That ratio is the appeal, and it is also the problem. The ACCC has been clear since 2023 that the same claim will trigger enforcement if the underlying evidence does not support it.

Before going further, the most common mistake first. Avoided emissions are not a substitute for your Scope 1, 2 and 3 inventory. They sit alongside it. They never reduce it. A solar inverter manufacturer that reports 500 tonnes of Scope 1 and 2 emissions and claims 1.2 million tonnes of avoided emissions from products sold still has 500 tonnes of Scope 1 and 2 emissions in its mandatory disclosure. Treating the avoided number as a reduction in the inventory is misleading on its face and is exactly the kind of presentation the ACCC's eight greenwashing principles were written to prevent.

What avoided emissions actually are

The working definition comes from the WBCSD Guidance on Avoided Emissions, first released in March 2023 and refined through a structured testing programme in 2025. Avoided emissions are the difference between two scenarios. The first is the emissions associated with using the solution product. The second is the emissions of a reference scenario, often called the counterfactual, describing what would have happened in the absence of the solution. Subtract one from the other and the gap is the avoided emissions.

The framework was developed because companies selling low-carbon solutions had no consistent way to demonstrate the climate impact of their products. Reporting only the Scope 1, 2 and 3 inventory of a renewable generator told you what the wind farm emitted, but said nothing about the coal generation it displaced. The avoided emissions number filled that gap. It is supplementary information. It is never a deduction from the inventory.

The distinction matters under Australian law because the Competition and Consumer Act 2010 sections 18 and 29 apply to representations made in trade or commerce regardless of whether the figure appears in a marketing brochure, an investor deck or a sustainability report. Misleading is misleading wherever it appears.

The four use cases that are growing fastest in Australia

Four sectors are leaning into avoided emissions reporting more than the rest of the market. Each carries a different evidence challenge.

Renewable energy generators report avoided emissions from their megawatt-hour output against the grid emissions factor. The challenge is which factor to use. Average grid emissions, marginal emissions, or the long-term planned mix all produce different numbers, and the methodology choice can swing the result by a factor of two or three.

Software and digitalisation vendors claim avoided emissions from physical activities their product replaces. The challenge is the counterfactual: would the customer actually have flown, printed, driven or built a server room without the product? The honest answer is sometimes yes, sometimes partially, sometimes no, and the methodology has to handle that uncertainty rather than assume the maximum substitution.

Low-carbon materials producers in construction claim avoided emissions against the higher-carbon alternative the customer would otherwise have specified. Portland cement, virgin steel and primary aluminium have published baseline factors, but additionality questions arise quickly. The connections to internal carbon pricing under AASB S2 are explored separately.

Financial institutions report avoided emissions through green bond proceeds, sustainability-linked loans and project finance. The challenge here is attribution: how much of a project's avoided emissions can be claimed by a bank that financed 40 per cent of the capital stack, and what happens when the same project is referenced in three different lenders' disclosures? This is unsettled.

What the ACCC will examine first

The eight principles in the ACCC's "Making environmental claims" guidance apply to every avoided emissions claim made in Australia. Several of them bite hard on this category.

Substantiation. The headline number must be supported by written evidence that existed before the claim was made. Calculating the number after the marketing copy was approved does not satisfy this. The evidence is the methodology document, the input data, the assumptions log, and the verification report if one exists.

Truthful and specific. The number cannot overstate, and vague language does not survive scrutiny. "Our product is helping decarbonise" fails. "Our product avoided 412,000 tonnes of CO2-e in FY2026 against the National Electricity Market average factor of 0.62 kg CO2-e per kWh" is auditable.

Whole product or service. The claim must reflect the full lifecycle impact, not just the operational phase. A renewable generator that ignores the embodied emissions of turbine manufacturing and decommissioning has selected an aspect and omitted the rest.

Transparent and verifiable. The methodology, reference scenario, assumptions and verification approach must be disclosed alongside the headline number, not behind a request form. A third party with access to the same inputs must be able to replicate the result.

Doesn't omit important information. If the same megawatt-hours that generated the avoided emissions claim were sold as Large-scale Generation Certificates to a buyer who surrendered them for Scope 2 reporting, omitting that fact is the kind of omission the regulator has signalled it will investigate.

Avoided emissions claims that publish only a headline number, with no methodology note and no verification, sit squarely inside the failure pattern. The Mercer, Vanguard and Active Super cases collectively returned over $34 million in penalties from sustainability claims the evidence base could not support. None were specifically about avoided emissions, but the underlying logic carries: a claim was made, the evidence was thin, the penalty followed.

The counterfactual problem

The hardest part of any avoided emissions calculation is the question of what would have happened instead. There is no observable counterfactual. It has to be constructed, and the construction always involves judgement.

Take a 100-megawatt solar farm in central Queensland generating 240 gigawatt-hours per year. The avoided emissions calculation depends entirely on what those megawatt-hours displaced.

Against the Queensland operational grid factor of 0.67 kg CO2-e per kWh, the claim is roughly 161,000 tonnes per year.

Against the short-run marginal emissions of the gas-fired generation actually backed down at the moment the solar was producing, the claim might be closer to 130,000 tonnes.

Against a long-run planned grid mix that already assumed significant renewable build-out, the claim could be 80,000 tonnes or less, because some of that solar generation was already in the plan.

Same farm, same megawatt-hours, three defensible numbers with a 2x spread between the high and the low. The choice of reference scenario is not a minor footnote. It is the single largest driver of the result, and ACCC scrutiny of avoided emissions claims will start by asking why a particular reference scenario was selected over the alternatives. The answer needs to be a written methodology decision made in advance, not a backward justification of the number that produced the best marketing outcome.

Additionality and double counting

A renewable generator that sells LGCs to a third-party buyer has sold the renewable attribute of those megawatt-hours. The buyer who surrenders those LGCs claims the zero-emissions attribute for Scope 2 reporting. If the generator then claims avoided emissions from the same megawatt-hours independently, the same environmental attribute has been counted twice.

The same logic applies to GreenPower, voluntary cancellations, Climate Active offset retirements, and any other instrument that transfers an environmental attribute to a third party. Anything that has been sold or surrendered to someone else cannot also support the seller's avoided emissions claim.

In practice this means avoided emissions claims have to be net of any environmental attributes the company has sold, surrendered or transferred. That requires a transactional record at the megawatt-hour level, not at the annual aggregate level. Most companies that try to construct an avoided emissions claim at year-end discover the data system was never set up to answer this question. The numbers reconcile at the corporate level and look messy at the certificate level, which is exactly where the legal exposure lives.

The ACCC's broader greenwashing enforcement record shows the regulator is willing to spend years in Federal Court over claims where the evidence was thinner than the marketing suggested. The same evidence standard applies to avoided emissions.

The WBCSD framework, condensed

The methodology that most Australian companies should be using is the WBCSD five-step approach. Briefly:

Define the solution product. What is being sold, to whom, in what quantity, over what time period. The definition has to be precise enough that an auditor can identify which sales are inside the boundary and which are not.

Define the reference scenario. What is the customer most likely to have done in the absence of this product. The reference scenario must be defensible against the alternatives, and the choice has to be documented.

Calculate avoided emissions. Solution-product emissions minus reference-scenario emissions, with inputs traceable to source data.

Document additionality. Demonstrate that the environmental benefit being claimed has not been sold, surrendered or transferred to another party.

Disclose with transparency. Publish the methodology, the assumptions, the inputs, the verification approach and the residual uncertainty alongside the headline number.

A claim made without these five steps documented is exposed under ACCC scrutiny. Not theoretically exposed. Practically exposed, because once the regulator asks for the workings, the absence of any one of these steps is enough to invite a formal investigation.

How avoided emissions sit inside AASB S2

The Australian Sustainability Reporting Standards do not require avoided emissions disclosure. AASB S2 paragraph 29 requires Scope 1, 2 and 3 reporting plus the related governance, strategy, risk and target disclosures. Avoided emissions can sit alongside as supplementary information, but only if disclosed clearly as such.

If a company chooses to include avoided emissions inside its AASB S2 disclosure, ASIC will apply the same materiality, substantiation and transparency expectations to that section as it does to the rest of the report. The modified liability shield in section 1707D of the Corporations Act covers certain Scope 3 and forward-looking statements made in compliance with AASB S2 during the transition period. It does not cover marketing claims made outside the statutory disclosure, and it has never been tested in court.

ASIC RG 280 emphasises substantiation, internal controls and the evidence trail behind every figure that ends up in the annual report. Avoided emissions inherit those expectations whether or not AASB S2 specifically required the disclosure. If you put the number in the annual report, the regulator will read the methodology note, and the modified liability shield is not a substitute for getting it right.

Practical sequence before publishing the claim

There is a defensible way to do this and an exposed way, and the difference is procedural.

Document the solution product and reference scenario in writing before the calculation runs. The decision about which counterfactual to use is the single biggest driver of the result, and the regulator will ask why that scenario was chosen.

Run the calculation with documented inputs, factor sources and assumption logs. Every input needs a source. Every assumption needs a written justification.

Verify additionality. Reconcile against the certificate register: have any of the megawatt-hours, tonnes or units been sold or surrendered elsewhere. If yes, net them out before the headline number is calculated.

Get independent verification where the claim is material. The WBCSD framework points toward third-party assurance for any avoided emissions claim used in external communications. The assurance scope should cover methodology, inputs and the additionality reconciliation.

Disclose the methodology note alongside the headline number. Same page, not three clicks away. Then run the claim past legal review with explicit reference to the ACCC eight principles and the Australian Consumer Law sections 18 and 29, before publication rather than after a regulator phone call.

What the data system has to do

Avoided emissions calculations depend on the same source data that feeds the Scope 1, 2 and 3 inventory: production records, sales records, customer activity, certificate registers. A system that tracks emissions at the product, project or customer level produces a defensible avoided emissions calculation as a byproduct of the inventory work. A spreadsheet maintained separately for marketing claims, with no link to the underlying transactional data, is the exposure pattern.

Carbonly is built around a single source of truth for emissions data. The same document engine that processes invoices for Scope 2 inventory generates the production and consumption records an avoided emissions calculation needs. Period locking stops inputs drifting after a claim has been published. The audit trail provides the chain of custody the ACCC's substantiation principle requires. Three autonomy modes (shadow, copilot, trusted) let legal review set the level of human approval before any extracted figure flows into an external claim.

The honest position: a good data system makes a defensible claim defensible. It does not rescue a poorly-constructed counterfactual. The methodology decision and the legal review still sit with the company.

The question to ask before publication is simple. If the ACCC sent a notice tomorrow asking for the workings behind the headline number, could you produce the methodology document, the input data, the additionality reconciliation and the verification report inside a week. If the answer is no, the claim is not ready.

To explore an integrated data system for avoided emissions and inventory reporting together, reach out at hello@carbonly.ai or join the waitlist.