What's at Stake with Omnibus
But also — Clean Industrial Deal, Merger Control, Trade
Hello! Today is Tuesday 4 March, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
Climate regulations are no longer in favor. The European Commission last Wednesday softened several legislative achievements of the Green Deal adopted during Ursula von der Leyen's first term, under pressure after Donald Trump's election and the 2024 European elections, which saw the right wing parties come first.
SIMPLIFY • Waving simplification as one of the priorities of the mandate, the European Commission aims to reduce the administrative burden on businesses by 25%, considered a hindrance to competitiveness. The target rises to 35% for SMEs.
In the Commission's sights: the 2022 directive on corporate sustainability reporting (CSRD), the 2024 directive on due diligence (CS3D), the 2020 regulation on green taxonomy, and the carbon border adjustment mechanism (CBAM), adopted in 2022.
The Commission assured in a statement that these proposals will reduce the complexity of regulatory requirements for all businesses, especially SMEs, and refocus the EU’s regulatory framework on large companies, whose impact on climate and the environment is more significant.
According to estimates, if these measures are adopted, they could translate into an "administrative relief of more than 6 billion euros" for European industry.
OMNIBUS • Under this so-called "Omnibus" legislation the CSRD directive, which requires companies to publish their non-financial data (environment, governance, social impact), would see its scope reduced by 80%.
Only companies with more than 1,000 employees and a turnover of 50 million euros would be in scope, compared to an initial threshold of 250 employees. Furthermore, the entry into force of the reporting obligation would be postponed by two years, until 2028.
The green taxonomy regulation, which classifies economic activities according to their environmental impact, would undergo a similar reduction: it would only apply to 20% of the initially concerned companies, while the reporting models would be simplified by 70%.
The CS3D directive, designed to mandate companies to prevent human rights and environmental violations within their value chains, would see its implementation for large companies delayed until July 2028.
More significantly, its scope would be substantially narrowed: instead of covering the entire value chain, it would only apply to companies' direct operations, their subcontractors, and their direct business partners.
The frequency of assessments would change from annually to every five years, which could generate, according to the Commission, an estimated saving of 320 million euros in compliance costs for companies.
Finally, the Commission proposes to reduce by 90% the number of companies covered by the carbon border tax, supposed to come into force in 2026.
CONTROVERSY • While these proposals still need to be negotiated in the European Parliament and the Council of the EU, they are already eliciting mixed reactions.
Professional federations and the European right (EPP) welcome an initiative that, according to them, eases the regulatory burden and strengthens the competitiveness of businesses. Conversely, environmental NGOs and left-wing parties fear that this simplification will come at the expense of the transparency required by investors and that it is only a first step towards a broader dismantling of environmental standards.
Indeed, new waves of simplification are expected in the coming months. The Common Agricultural Policy (CAP) and the REACH regulation, which governs the use of chemicals, could be next.
"It is now clear that ‘simplification’ is just a Trojan horse for aggressive deregulation," says Faustine Bas-Defossez, environmental director of the European Environmental Bureau. "What this package does create, however, is legal uncertainty, rewarding laggards while penalising companies that were moving early to monitor and report their environmental impact.”
In response to the criticism, the European Commission refutes any deregulation. "We have been very clear: our simplification program is not deregulation. We are not changing the goals or targets of the Green Deal," assured Valdis Dombrovskis, Commissioner in charge of simplification, on Wednesday.
According to him, this bill will achieve environmental goals "more efficiently and at a lower cost."
While debates are expected to be heated in the European Parliament, discussions should be more peaceful in the Council.
On November 8, 2024, in their Budapest declaration on the new European Competitiveness Pact, EU heads of state and government had already called on the Commission to lighten companies' reporting obligations. But they had also requested that the proposals be accompanied by impact studies — which the Commission has not carried out.
In Case You Missed It
CLEAN INDUSTRIAL DEAL • On February 26, the European Commission presented its long-awaited Clean Industrial Deal. This initiative had been announced by Ursula von der Leyen in her re-election speech to the European Parliament in July 2024.
The goal of the Clean Industrial Deal is to strengthen the competitiveness of European industry while accelerating decarbonisation. The plan focuses on two main areas: (i) facilitating decarbonisation and electrification of energy-intensive industries and (ii) supporting the development of clean technologies.
The Commission emphasises that it has retained its long-term climate objectives of reducing emissions by 90% by 2040 and achieving carbon neutrality by 2050.
The Deal includes measures on the six main drivers of green competitiveness identified by the Commission: energy prices, demand for clean products, public and private investments, circularity and access to materials, global markets and international partnerships, and a skilled workforce.
Among the key measures announced by the Commission:
The creation of an industrial decarbonisation bank funded with 100 billion euros. This funding will come from the Innovation Fund, a revision of the InvestEU program, and revenue from the European emissions trading system.
A new state aid framework aimed at allowing the Commission to approve aid more quickly and simplifying the procedure for Member States to notify the Commission about aid.
An action plan for affordable energy aiming to save 260 billion euros by 2040.
A revision of the European public procurement directives in 2026, which will aim to integrate European preferences in strategic sectors.
From the perspective of business, the measures proposed by the Commission are positive but do not go far enough, and the adoption timeline proposed by the Commission is not ambitious enough.
MERGERS • Teresa Ribera, the European Commissioner for Competition, told the Financial Times that she supports a rebalancing of European policy on merger control.
The goal is twofold: (i) modernise the rules to allow European companies to better compete on the global stage, and (ii) better account for the environmental, social, and technological benefits of mergers.
Teresa Ribera believes that a sole focus on the impact on prices would lead to “the lowest price for everything — including labour.”
France and Germany have repeatedly called for a relaxation of the rules in response to the Commission’s refusal to approve several major mergers in recent years such as Alstom/Siemens, Thyssenkrupp/Tata Steel, and LSEG/Deutsche Börse.
In his September report, Mario Draghi called for innovation efficiency gains to be better taken into account when the European Commission assesses merger proposals.
An ‘innovation defence’ would be justified by the need in certain sectors to pool resources to cover large fixed costs and achieve the scale needed to compete at the global level, as has been the case, for instance, with Airbus,” noted the former ECB president.
According to Mario Draghi, the Commission should detail the criteria for evaluating innovation efficiency gains. These must be “specific enough to limit the risk of companies abusing this defence strategy, while still giving them the opportunity to justify their merger.”
Like Teresa Ribera, Mario Draghi also proposes adding resilience criteria in the assessments conducted by the Directorate-General for Competition.
DEFENCE • European heads of state and government will meet for an extraordinary European Council on March 6. The agenda includes European defence and support for Ukraine. A summary of discussions will be provided next week.
TRADE • On February 26, Trump clarified his plans regarding reciprocal tariffs announced two weeks earlier.
The US president announced a general tariff of 25% on goods from the EU. He indicated that these tariffs would target, among other sectors, the automotive industry. During the same meeting, Donald Trump asserted that the EU had been created to “screw over” the United States.
The European response remains unclear for now. On February 28, Macron announced that the EU would impose tariffs on imports of steel and aluminum from the United States if Trump puts his tariff threats into action in April.
In a speech to the European Chamber of Commerce in New York, European Commissioner for Trade Maroš Šefčovič called for de-escalation, advocating for cooperation as much as possible.
Faced against a hostile US trade policy, the EU is looking to strengthen its trade partnerships with other countries. Ursula von der Leyen visited New Delhi to meet with President Modi specifically on matters of trade.
The two leaders agreed to conclude a free trade agreement by the end of the year. Negotiations for an EU-India free trade agreement resumed in 2021, several years after a deal failed to be reached in 2013.
What We’ve Been Reading
In Politico, James Angelos offers a potted profile of Friedrich Merz, Germany’s likely chancellor-in-waiting.
This edition was prepared by Antonia Przybyslawski, Augustin Bourleaud, Thomas Veldkamp, Antoine Langrée, Edgar Carpentier-Charléty, Lucie Rontchevsky, Hana Rajabally, Maxence de La Rochère. See you next week!