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The EU-Turn: Europe’s Green Deal In Reverse

The EU-Turn: Europe’s Green Deal In Reverse

Tim Mohin
May 16, 2025

What’s in this week’s newsletter:

The EU could further weaken green deal policies
Europe’s Central Bank urges caution
EFRAG will simplify and align its standards
CDP restructures and streamlines disclosures
GOP tax bill slashes the IRA
NOAA and USDA restore climate data
Global bank regulators prioritize climate risks, despite US pushback

This year has been dubbed the ‘sustainability recession.’ Regular readers are becoming accustomed to the steady drumbeat of rollbacks and reversals. Steel yourself, here comes more:

Since the EU released its “Omnibus Simplification Package” in February, there have been signals that simplification could become deregulation. Under the Omnibus, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) will be reduced in scope and speed. (We summarized the proposed changes in a previous addition here.)

Now, lead negotiator Jörgen Warborn is considering further restrictions to the CSRD - requiring only companies with 3,000 or more employees to report. As for the CSDDD, he wants the climate transition provisions removed and the compliance date (2028) to be pushed back.

Newly elected German Chancellor Friedrich Merz asked the EU to go a step further and scrap the CSDDD altogether, like he did with the similar German supply chain rule. In his first visit to Brussels, he said, “We will revoke the national law in Germany, and I also expect the European Union to follow suit and really cancel this directive.” However, this would go against his ruling coalition's agreement to replace the German law with the CSDDD.

In addition, late last week, the EU Parliament agreed to soften emissions rules for EU car makers. The rule extends the deadline for emission reductions and reduces fines for automakers, which some estimates put at $17 billion. And there is more to come as energy policies are the next regulations for the simplification treatment.

In the midst of these rollbacks, there was a powerful voice of caution from the European Central Bank (ECB). The ECB objected to removing 80% of companies from coverage under the CSRD, stating that “this amendment could significantly limit stakeholders’ access to important information,” and warning of “unwanted outcomes,” including reducing the overall availability of sustainability information, including information on greenhouse gas emissions – noting that some significant emitters, including fossil fuel companies, will fall outside the scope of reporting. The ECB recommended that the scope of mandatory reporting should be any company with more than 500 employees.

Some EU member states are also pushing back, asking for the CSRD and CSDDD to return to something resembling the original before the Omnibus started.

EU Sustainability Standards Simplify & Harmonize

EFRAG’s sustainability reporting technical expert group chair, Chiara Del Prete

The European Financial Reporting Advisory Group (EFRAG) is hard at work simplifying the European Sustainability Reporting Standards (ESRS). Their mandate is to deliver the streamlined standards this October - far faster than the normal procedure.

During a public hearing (from 16:50 in this video), EFRAG’s sustainability reporting technical expert group chair, Chiara Del Prete, outlined the compressed process to simplify the ESRS and align “as much as possible the language with the one in the IFRS standards.” She explained that EFRAG has already received more than 800 comments and consulted with more than 40 companies that have reported using the existing ESRS.

CDP Restructures

This week CDP - formerly Carbon Disclosure Project - now in its 25th year, announced a global restructuring shedding 20% of its staff. The changes aim to reduce disclosure burden and provide access to high-quality, decision-useful data.

CDP CEO Sherry Madera said, “The restructuring announced today reflects our commitment to our partners and stakeholders to deliver consistent, comparable data that enables faster, smarter decisions.”

House Aims to Cut IRA Tax Credits

House Speaker Mike Johnson

On Monday, the Republican controlled US House of Representatives released a series of tax proposals, which, if enacted into law, would hobble the U.S.'s largest-ever climate bill, the Inflation Reduction Act (IRA).

The collection of proposals dubbed "One Big, Beautiful Bill (BBB)" would:

End most EV tax credits this year, and all by the end of 2026.
Phase out tax credits for clean energy projects by 2032.
Terminate residential efficiency credits by the end of 2025.

Notably, the tax credits for carbon capture and storage (45Q), clean fuel production (45Z), and advanced energy (48C) remain.

The first of those bills from the Energy and Commerce Committee was approved on Tuesday. It will claw back yet unspent funds from the IRA and speed up fossil fuel permitting.

These moves face opposition as 26 Republican representatives whose states received almost two-thirds of IRA spending are asking their fellow GOP members to keep some key aspects of the law in place to limit job losses and preserve investment in their states. Juan Ciscomani (R-Arizona) said, “When I looked initially at the energy tax credits and how they were benefiting Arizona, it made sense for me to stand up for that.”

Restoration of US Climate Data

This week, the US Department of Agriculture was forced to restore climate data relied upon by farmers to their website. The reversal came after a lawsuit from environmental and farming groups claiming the data is needed to make time-sensitive business decisions. Democrats are also pressuring the National Oceanic and Atmospheric Administration (NOAA) to restore its “billion-dollar disaster database.”

NOAA currently has more than 150 job openings at the National Weather Service, which is the early warning system for extreme weather events. Former NOAA employees and Democrats are worried that government cuts have left the agency with too few experts to prepare for the upcoming Atlantic hurricane season. Former NOAA official Tom DiLiberto said, “We’re not prepared. We’re heading into hurricane season as unprepared as anytime as I can imagine,”