European Union
The Green Deal under revision
Updated yesterday
2/5
The EU's climate agenda has formally pivoted from legislative expansion to a phase of implementation, simplification, and competitiveness-driven recalibration, marking a strategic retreat from new regulatory ambition.
Spain's record July heat and wildfires added to the ongoing debate about climate adaptation and the implementation of Green Deal policies, while Poland's inflation data indicated economic pressures.
State of play
The EU's climate policy framework is now fully oriented around implementing existing rules through a lens of industrial competitiveness and regulatory simplification. The European Parliament's formal approval of the softened 2040 climate pathway, which allows foreign carbon credits and delays the ETS2 expansion, codifies this political consensus. The European Council has endorsed the Commission's 'Competitiveness Compass', explicitly linking decarbonisation to industrial policy and reducing business burdens for the 2024–2029 policy cycle. The amended European Climate Law has entered into force, setting a legally binding 90% net greenhouse gas reduction target by 2040 and committing to subsequent adjustments of existing instruments like the Effort Sharing Regulation and LULUCF. The Commission is preparing a review of the EU's climate policy framework in 2026 to align national targets and flexibilities with the new 2040 target, focusing on technical adjustments rather than new legislation.
Implementation and Industrial Policy
Work continues on drafting detailed implementing rules for delayed measures, such as methane regulations for fossil fuel imports, and on preparing an overhaul of the post-2030 ETS that will trade flexibilities for industry against binding green investment commitments. The Commission has issued two recommendations urging member states to suspend penalties on non-compliant oil and gas imports from 2027 to 2029, while keeping all monitoring and reporting obligations in force. This move aims to avoid supply disruptions amid tight global markets and follows sustained pressure from major LNG suppliers and some member states. The operational core of the new approach is the Clean Industrial Deal, which bundles support for green tech manufacturing, permitting simplification, and state aid. This, alongside the grids and electrification package aimed at unblocking renewable energy connections, reframes climate action as a matter of infrastructure, supply chain security, and sectoral decarbonisation strategies. The Commission has officially agreed to review the 2035 ban on new internal-combustion engine cars as part of its competitiveness-oriented agenda, with a growing push from member states to revisit this ban. Industry complaints over the administrative burden and trade frictions of the Carbon Border Adjustment Mechanism (CBAM) are mounting, with calls for simpler procedures and clearer guidance before full financial obligations begin. Debate over future EU taxonomy delegated acts is shifting towards relieving compliance burdens for smaller banks and corporates, focusing on streamlining rather than expanding rules.
Legal and Trade Dimensions
The EU’s first-ever methane regulation for the energy sector officially entered into force in August 2024, launching phased implementation of monitoring, reporting, verification, and leak detection obligations for oil, gas, and coal operators, with new import contract rules from January 2027. An intensifying lobbying effort by the oil and gas industry and exporting countries, including the United States and Qatar, along with eleven EU governments, seeks to delay or soften enforcement of these rules, citing energy security concerns. A Paris court ruling has ordered TotalEnergies to account for emissions from its customers' use of products in its climate vigilance plan, setting a precedent for corporate climate accountability under national laws. On trade, a new EU customs rule ending the duty-free threshold for small parcels from outside the bloc is now in effect, aiming to level the playing field for EU businesses. The EU has also significantly tightened its steel import safeguard measures, slashing duty-free quotas by 47% and imposing a 50% tariff on excess volumes to shield domestic mills from cheap Chinese and diverted US steel. Germany has blocked an EU initiative to ban goods from Israeli settlements, insisting on a unanimous vote for any such import restrictions. The Commission's review of the Foreign Subsidies Regulation proposes limited procedural simplifications like higher notification thresholds, illustrating the broader institutional pattern of streamlining existing rules that intersect with green industrial policy.
Climate Adaptation
France's High Council for Climate has called for expanded adaptation and emissions-reduction policies after the country experienced its third heatwave of 2026, straining hospitals and sparking wildfires. Mainland France has warmed 2.2°C since the early 20th century, with summer temperatures increasing by 2.9°C. France has taken three nuclear reactors offline and limited eight others as river temperatures spike during its third heatwave, impacting energy production. The Commission has proposed a non-binding 46% target for electricity's share in final energy consumption by 2040, aiming to double power use while avoiding new binding obligations. This indicative target, part of a broader Electrification Action Plan, emphasizes industrial, transport, and building electrification, with a focus on closing the electricity-to-gas price gap. The Electrification Action Plan also includes measures for member states to reduce network charges for selected user groups, lower energy taxes for energy-intensive industries, and accelerate smart-meter deployment. President Nawrocki has submitted a new referendum proposal to the Senate concerning the EU's climate policy, with a tentative vote date set for 27 September. EU civil protection authorities are now prioritizing wildfire climate-adaptation measures, noting a shift in risk eastward across southern and central Europe, requiring reinforced early warning and cross-border capacity. Spain's record July heat and wildfires are intensifying pressure on EU institutions to balance climate ambition with flexible implementation of Green Deal rules.
Key events
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This week
- Spain experienced its hottest July on record, with wildfires across multiple regions.
- Polish annual CPI rose to 3.0% in July, driven by a 13.9% monthly jump in fuel prices.