EU environmental rollback accelerates under new Commission competitiveness drive

The European Union's dismantling of its own environmental framework has moved from rhetorical shift to legislative reality in the first half of the new Commission mandate. What began as a promise to simplify has become a systematic reduction in the scope, ambition and enforceability of the Green Deal's core pillars. The evidence lies not in press releases but in the legal texts now moving through the institutions: an omnibus package that postpones corporate sustainability reporting by two years and cuts the number of covered companies by 80%; a one-year delay to the deforestation supply-chain regulation; a two-year extension for carmakers to meet CO2 targets; and the withdrawal this week of the anti-greenwashing directive at the final negotiation stage.

The omnibus mechanism and the 80% carve-out

The first omnibus simplification package, presented in February, is the clearest signal of intent. It targets three legislative pillars simultaneously: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Carbon Border Adjustment Mechanism (CBAM). The reporting delay alone pushes the first compliance date for many large companies from 2025 to 2027. The scope reduction is more consequential: by raising the employee threshold and adjusting turnover criteria, roughly 80% of the companies originally captured by CSRD would fall outside its requirements. On Monday, member states in the Council proposed going further, suggesting an even narrower scope that would exclude an estimated 90% of businesses from CBAM reporting obligations.

Paul de Clerck, a campaigner at Friends of the Earth Europe, described the package as the first real test of the simplification agenda. This is highly relevant because it's the first proposal under the simplification agenda that's been put forward and ... it's not just weakening it a little bit, it's slashing it. The heart of the proposal has basically been taken out. The Commission also removed a requirement for in-depth impact assessments and scrapped a civil liability clause that would have made it easier to sue companies for environmental harm in their value chains.

Political arithmetic in the Parliament and Council

The legislative arithmetic has shifted. The European People's Party (EPP), the largest group in the European Parliament and the political home of 15 of the 27 commissioners including von der Leyen, has moved openly toward a deregulatory posture. Its leadership framed the anti-greenwashing law's withdrawal as a win for European companies. The bill, which would have required companies to substantiate environmental claims, was killed after EPP and far-right MEPs separately wrote to the Commission demanding its withdrawal. Tiemo Wölken, the German S&D MEP who led negotiations on the file, said the Commission obviously wanted to fulfil the wishes of the right, and this is what is so scandalous. The EPP is again working with the far right to get rid of Green Deal files, but are pretending they are still in the middle and working with pro-European democratic forces.

This alignment is not new. After farmers' protests swept Europe in early 2024, the nature restoration law, already agreed between institutions, nearly collapsed. It survived only after the Commission watered down its provisions. That episode established a pattern: ambition is lost at the top while resistance hardens in the Council and Parliament. The current Commission's mission letters, sent to commissioners in September, codified the new priority: a 25% reduction in administrative burdens for all companies, 35% for small and medium-sized enterprises, and a one in, one out principle requiring every new rule to displace an existing one.

The competitiveness argument and its critics

The Commission insists it is pursuing simplification, not deregulation, and that competitiveness does not contradict the Green Deal's environmental aims. It points to the Clean Industrial Deal, presented in February, as evidence that industrial decarbonisation remains central. BusinessEurope, the continent's largest industry federation, backs this framing. Its director general, Markus Breyer, said the Green Deal often overlooked challenges like high energy costs or lengthy and complex permitting procedures and that the current focus reflects a more balanced and pragmatic approach that better aligns climate goals with economic realities.

Critics counter that the numbers tell a different story. The 80% scope reduction in sustainability reporting is not a technical adjustment; it removes the majority of large European companies from transparency obligations. The CBAM carve-out exempts the very sectors, steel, aluminium, cement, where carbon leakage risk is highest. The civil liability clause removal eliminates the primary enforcement mechanism for the due diligence directive. Marco Contiero, Greenpeace EU's agricultural policy director, argued the shift began before the US election: There has been a radical change in political priorities, and this came before Trump was even close to election in the US. He warned that abandoning the Green Deal's core logic, decoupling economic growth from resource use, will take away the competitive advantage that Europe could have had.

A pattern of delays and downgrades

The omnibus package is the centrepiece but not the only move. The deforestation regulation, adopted in 2023 after years of negotiation, was postponed by 12 months in October 2024, pushing its application date to December 2025 for large operators. The Commission cited global preparedness concerns, but the delay followed intense lobbying from producer countries and European traders. Carmakers secured a two-year extension to the 2025 CO2 fleet targets, effectively weakening the regulation that was meant to accelerate the transition to electric vehicles. In December, the Commission proposed downgrading the wolf's protection status under the Bern Convention, a symbolic but politically charged concession to agricultural interests.

Environmental NGOs have also faced a funding freeze. The Commission paused operating grants for several green groups under the LIFE programme, citing compliance checks. Campaigners argue the move is politically motivated, designed to weaken civil society's capacity to scrutinise the rollback. The European Environmental Bureau called it an attack on democratic participation.

The international context and the investment gap

The EU's retreat coincides with a global slump in climate ambition. The UK government faces growing backlash against its 2050 net-zero target. In the United States, the second Trump administration has opened with executive orders dismantling environmental agencies and promoting fossil fuel expansion. Contiero's point is that the EU's shift predates Trump's return: the rightward turn in European polls before the June 2024 elections set the domestic political conditions for the current agenda. The Commission's competitiveness narrative is a response to that electoral signal, not to Washington.

The economic stakes are substantial. The European Investment Bank estimates the EU needs €520 billion per year in additional green investment to meet 2030 targets. The Green Deal's regulatory architecture, taxonomy, disclosure, due diligence, carbon pricing, was designed to channel private capital toward that gap. Weakening the disclosure regime reduces the data investors need to price climate risk. Exempting 90% of firms from CBAM reporting undermines the carbon price signal. Removing civil liability weakens the incentive for supply-chain due diligence. Each change increments the investment shortfall.

What the Clean Industrial Deal does and does not cover

The Commission's Clean Industrial Deal, presented as the positive counterpart to the omnibus cuts, focuses on state aid flexibility, permitting acceleration, and access to critical raw materials. It includes a €100 billion manufacturing fund and proposals to speed up approvals for net-zero technologies. These are supply-side measures. They do not replace the demand-side pull created by binding targets, carbon pricing, and transparency rules. Industry groups welcome the permitting reforms but have been notably silent on the omnibus scope reductions. The silence suggests a calculation: regulatory certainty matters less than regulatory absence.

The next legislative battles

The omnibus package now enters trilogue negotiations between the Parliament, Council and Commission. The Council's Monday position, pushing for even narrower scope, sets a hard starting line. The Parliament's lead committees will vote in the coming weeks. The EPP's coordination with far-right groups on the anti-greenwashing withdrawal suggests a repeatable majority for further dilution. The Commission, having proposed the package, could still withdraw or amend it, but von der Leyen's mission letters commit her to the simplification targets. The Clean Industrial Deal's state aid and permitting proposals face their own legislative track, likely extending into 2026. The wolf protection downgrade requires a Bern Convention vote in December. The deforestation regulation's one-year delay expires in December 2025, when the Commission must decide whether to propose a further extension.