An Australian court on Tuesday threw out a lawsuit against gas producer Santos that alleged the company misled the public on its plans to achieve net zero carbon emissions.

The lawsuit was launched in 2021 by the Australasian Centre for Corporate Responsibility, an activist shareholder, which said it was the first case of its kind in any country to challenge the validity of a company’s net zero emissions target.

Under pressure from investors concerned about climate change, companies around the world have set out ambitious targets to be carbon neutral within the next 20 to 30 years.

The case in the Federal Court of Australia had been closely watched given its potential implications for how legal action could be used to hold companies accountable for their climate targets.

The ACCR alleged Santos breached Australia’s corporations and consumer laws by engaging in misleading or deceptive behaviour when it said it had a clear pathway to reduce emissions by 26%-30% by 2030 and reach net zero by 2040.

The group also challenged Santos' claims it was a producer of "clean energy", that natural gas was a "clean fuel" and that hydrogen it produced from natural gas through carbon capture and storage (CCS) was "clean" with "zero emissions".

ACCR had asked the court to declare that Santos engaged in misleading or deceptive conduct, prevent the company from doing so in the future, and require the company to correct its statements.

But Federal Court of Australia Judge Brigitte Markovic dismissed the case, with her reasons to be published on February 23.

Brynn O’Brien, ACCR's co-chief executive, said the outcome was disappointing, and the group would take time to review the decision before considering its next steps.

"This was a landmark case that paved the way for others around the world to challenge corporate net zero claims in court," she said in a statement.

"It has been a David versus Goliath battle and Goliath won this round."

O’Brien said the ruling meant the burden was on investors to "scrutinise every statement, every number and every assumption provided by companies in relation to climate commitments".

Santos did not immediately respond to a request for comment.