The EU will stick to its world-leading climate goals, the bloc’s economic competitiveness tsar has vowed, even as it prepares to water down some of the green policies to placate the bloc’s ailing industry.
The EU’s Green Deal, an ambitious set of policies aimed at decarbonising the economy, was launched in 2019 but has since come under assault from European companies complaining of high energy prices and stifling overregulation. Capitals are also concerned about moribund economic growth, while Donald Trump’s bonfire of US climate goals has increased calls for the bloc to rethink its entire approach.
“The global reality has evolved, and we may need to think to what extent these things that were there need to be updated,” European Commission vice-president Teresa Ribera told the Financial Times.
“We need to ensure that there’s a story of growth and prosperity,” said the commissioner in charge of the green transition and competition, adding that this was “a fine line that we need to strike”.
Ribera on Wednesday set out the Commission’s plan for how to find that balance between sticking to climate goals and improving the continent’s flagging competitiveness.
She promised to mobilise more than €100bn to support clean manufacturing, including via the European Investment Bank. The bloc’s next multiyear budget, which still has to be agreed, would also include a competitiveness fund to boost European research and manufacturing of clean tech.
A Clean Industrial Deal will lay out how to boost demand for made-in-Europe products — from steel to chemicals and cars — through streamlining public procurement and allowing the most power-intensive plants to get backing from the European Investment Bank when they purchase energy. The commissioner will also propose joint purchasing and strategic stockpiles of 17 critical raw materials.
Another area of action will be to drastically cut the number of small and medium companies affected by existing environmental regulations, reducing their reporting requirements and giving businesses more time to comply with the revised rules.
Brussels has estimated the cost of complying with EU rules at €150bn per year, an amount it wants to slash by €37.5bn by 2029. It has already pared back the effects of some green legislation, for example postponing a controversial anti-deforestation law for a year.
Ribera acknowledged the existence of overlapping, redundant or contradictory regulatory demands on EU companies. But she insisted that a push from the Commission to cut red tape was not the deconstruction of the Green Deal in disguise.
“What we need to avoid is using the word simplification to mean deregulation,” said Ribera. “I think that simplification may be very fair . . . to see how we can make things easier.”
How the proposed regime will change
-
Release about 80% of companies — those with fewer than 1000 employees or either a turnover of more than €50mn or a balance sheet €25mn — from having to report against the corporate sustainability reporting directive (CSRD) and taxonomy.
-
Delay compliance with the corporate sustainability due diligence directive (CSDD) by one year to 26 July 2028
-
Eliminate carbon border adjustment mechanism (CBAM) obligations for small importers, making up about 90% of importers, through a new annual minimum threshold of 50 tonnes of imported “CBAM goods.”
-
Simplify rules for companies that remain in CBAM scope, including those related to the calculation of embedded emissions and reporting requirements.
-
Raise the net turnover threshold for third-country undertakings from €150mn to €450mn.
-
Revise the European Sustainability Reporting Standards (ESRS), to cut the number of mandatory datapoints.
-
Remove double materiality for reporting
-
Remove the additional sector-specific reporting standards
Reduce due diligence checks from annually to every five years.
-
Limit the requirement to identify and assess actual and potential adverse impacts to direct business partners
-
Remove the duty to terminate business relationships
-
Eliminate requirement that member states adopt penalty provisions that provide for maximum fine of not less than 5% of net worldwide turnover
Yet critics were concerned that proposed changes “seem to go far beyond simplification which would make reporting easier, and they seem to be moving away from transparency, which is what investors have been asking”, said Heather Grabbe, senior fellow at economic think-tank Bruegel.
Investors who found fault included Gresham House, the specialist alternative asset manager. It said that by introducing the broad exemptions and postponements, the EU risked “undermining critical sustainability objectives rather than improving reporting efficiency.”
Companies also complained about the regulatory back-and-forth. Karen McKee, head of oil and gas major ExxonMobil’s product solutions business, told the FT that future investments in Europe would depend on regulatory clarity from Brussels.
“What we’re really looking for now is action” and for Brussels to strip its “well intended” regulation back and allow industry to innovate, she said. “Competitiveness is the focus right now because it’s simply a crisis. We are achieving decarbonisation in Europe through deindustrialisation.”
Reviving the EU’s flagging economic competitiveness has become a lodestar for the commission, alongside rapidly boosting the continent’s defence capabilities.
Both priorities have been exacerbated by Trump, who has threatened to withdraw the US’s security guarantees to Europe, vowed to slash US green rules and make his country even more attractive to investors.
Ribera acknowledged the drastic shift by the US, including Trump scrapping hundreds of billions of tax incentives for green technology, but said the EU would push on regardless.
“We are still open to work with our American partners if they want to work with us,” Ribera said. “But we are not going to stop what we do.”
The burning of fossil fuels is the biggest contributor to global warming, and last year was the hottest on record. Europe has become the fastest warming continent as a consequence, and costly extreme weather events have worsened as the global average temperature rise has surpassed 1.5C since pre-industrial times.
Climate Capital
Where climate change meets business, markets and politics. Explore the FT’s coverage here.
Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here
