Omnibus Directive : a setback for the European Green Deal ?

On 26^th Februa­ry 2025, the Euro­pean Com­mis­sion unvei­led a series of mea­sures aimed at sim­pli­fying three key texts of the Euro­pean Green Deal, under the name of the “omni­bus direc­tive”. The pro­ject was announ­ced as a stra­te­gic res­ponse to the rise of the Uni­ted States and Chi­na, two eco­no­mic giants inves­ting hea­vi­ly in the eco­lo­gi­cal tran­si­tion. But this announ­ce­ment soon pro­vo­ked reac­tions in the media and eco­no­mic circles. Envi­ron­men­tal asso­cia­tions and eco­no­mists expres­sed concerns about pos­sible dere­gu­la­tion. On the one hand, the reform is per­cei­ved as a neces­sa­ry stra­te­gic lever, on the other hand, as a poten­tial wea­ke­ning of the Union’s envi­ron­men­tal ambitions. 

While the Euro­pean Com­mis­sion defends this approach as a neces­si­ty for moder­ni­sing its regu­la­to­ry fra­me­work, many experts high­light the contra­dic­tions inherent in this approach. To dis­cuss this, we spoke to Phuc-Vinh Nguyen, head of the Ener­gy Centre at the Jacques Delors Ins­ti­tute, and Jacques Le Cacheux, asso­ciate pro­fes­sor of eco­no­mics at the Uni­ver­si­ty of Pau and the Pays de l’A­dour, two spe­cia­lists who sha­red their exper­tise on the sub­ject with Poly­tech­nique Insights. 

“The objec­tive of sim­pli­fi­ca­tion is a legi­ti­mate one, but it calls into ques­tion many of the advances voted through over the last five years,” says Phuc-Vinh Nguyen. This obser­va­tion reso­nates with Euro­pean cur­rent affairs, where the ten­sion bet­ween sim­pli­fi­ca­tion and envi­ron­men­tal rigour is at the heart of the contro­ver­sy, illus­tra­ting the com­pro­mises neces­sa­ry to recon­cile com­pe­ti­ti­ve­ness and sus­tai­na­bi­li­ty¹. 

“On the one hand, regu­la­tions such as the CSRD and the CS3D were sup­po­sed to steer pri­vate invest­ment towards sus­tai­nable pro­jects. Howe­ver, the EU is alrea­dy suf­fe­ring from a pri­vate invest­ment defi­cit, and this step back­wards makes it even more dif­fi­cult to achieve eco­lo­gi­cal tran­si­tion objec­tives,” adds the resear­cher. “On the other hand, poli­ti­cal­ly spea­king, this direc­tive ensh­rines the dere­gu­la­tion agen­da pro­mo­ted by the Mul­ti-Annual Ener­gy Pro­gramme (MEAP). That said, it is still only a pro­po­sal, sub­ject to amend­ment. Its out­come will pro­ba­bly influence the trade-offs of the next five years.” 

While conces­sions have been made to eco­no­mic and indus­trial inter­ests, nota­bly by easing cer­tain repor­ting obli­ga­tions or modi­fying the thre­sholds for the appli­ca­tion of regu­la­tions, these adjust­ments do not neces­sa­ri­ly imply a total rever­sal of pre­vious poli­cies. The idea of admi­nis­tra­tive sim­pli­fi­ca­tion remains com­pa­tible with the objec­tives of the Green Deal, and the ongoing dis­cus­sions still leave room for streng­the­ning cer­tain envi­ron­men­tal aspects. Moreo­ver, Euro­pean com­mit­ments to sus­tai­na­bi­li­ty remain a stra­te­gic prio­ri­ty, influen­cing cur­rent and future legis­la­tive deci­sions, as evi­den­ced by the pro­gres­sive imple­men­ta­tion of the CSRD Direc­tive and the pro­po­sed adjust­ments to sim­pli­fy cor­po­rate repor­ting, par­ti­cu­lar­ly for SMEs². 

The Euro­pean Union, which has long been at the fore­front of envi­ron­men­tal regu­la­tion, could indeed see its influence dimi­ni­shed with less strin­gent stan­dards. At the same time, the Uni­ted States, with the Infla­tion Reduc­tion Act, and Chi­na, with mas­sive invest­ments in the tran­si­tion, conti­nue to conso­li­date their posi­tions. This move­ment high­lights a major chal­lenge : the risk of the EU losing its com­pa­ra­tive advan­tage in green regulation. 

Jacques Le Cacheux dis­cusses the effects of this reform and believes that “in the short term, it allows some com­pa­nies to reduce their costs by avoi­ding cer­tain invest­ments.” Howe­ver, he warns against the more long-term conse­quences : “In the long term, these risks slo­wing down the eco­lo­gi­cal tran­si­tion.” He uses the auto­mo­tive indus­try as an example to illus­trate his point : “The Euro­pean Com­mis­sion has announ­ced a ban on the sale of com­bus­tion engines from 2035. If this rule is main­tai­ned, it sends a clear signal to manu­fac­tu­rers. But if we start relaxing the constraints, some com­pa­nies might think they don’t need to adapt right now, which would slow down inno­va­tion and the ener­gy transition.” 

He warns that relaxing the rules could hold back inno­va­tion and slow down the ener­gy tran­si­tion, which would under­mine the effec­ti­ve­ness of Euro­pean efforts to achieve envi­ron­men­tal objectives. 

The eco­no­mist Jacques Le Cacheux chal­lenges the idea that eco­lo­gi­cal stan­dards hold back indus­try : “This is a pre­con­cei­ved notion. In many cases, it is these stan­dards that push com­pa­nies to inno­vate. Take the example of decar­bo­ni­sa­tion tech­no­lo­gies : strict regu­la­tion can create mar­kets, encou­rage inno­va­tion and offer eco­no­mic opportunities.” 

Phuc-Vinh Nguyen agrees, poin­ting out that com­pa­nies some­times unde­res­ti­mate the long-term bene­fits of ambi­tious regu­la­tion : “Com­pa­nies often com­plain about the costs asso­cia­ted with stan­dards, but they for­get that these same regu­la­tions can offer long-term com­mer­cial oppor­tu­ni­ties. Too lax regu­la­tion could put Europe at a disad­van­tage com­pa­red to other more ambi­tious regions.” 

Among the pro­po­sals is the exemp­tion of com­pa­nies with fewer than 1,000 employees from sus­tai­na­bi­li­ty repor­ting obli­ga­tions, redu­cing the cove­rage of these obli­ga­tions from around 50,000 com­pa­nies to just 20% of that figure. In addi­tion, the car­bon bor­der levy would be limi­ted to imports of more than 50 metric tonnes per year, thus exclu­ding approxi­ma­te­ly 182,000 impor­ters. These adjust­ments aim to reduce regu­la­to­ry bur­dens while main­tai­ning envi­ron­men­tal objec­tives³. 

France, along with Ita­ly and some Cen­tral Euro­pean coun­tries, sup­por­ted this reform, par­ti­cu­lar­ly in the auto­mo­tive and ener­gy sec­tors, which risk suf­fe­ring from stric­ter envi­ron­men­tal rules. Antoine Armand, the for­mer French Minis­ter of the Eco­no­my (in Michel Bar­nier’s govern­ment), had also spo­ken out in Brus­sels in Novem­ber 2024 to advo­cate a review of the sanc­tions plan­ned for car manu­fac­tu­rers that do not meet the CO₂ emis­sion reduc­tion tar­gets in 2025⁴. 

In the same vein, Phuc-Vinh Nguyen high­lights the dual dimen­sion of this stra­te­gy. In his view, “France, in par­ti­cu­lar, has been very active on this issue. It is advo­ca­ting regu­la­to­ry adjust­ments so as not to harm its indus­try, par­ti­cu­lar­ly the auto­mo­tive indus­try. But it is not just a ques­tion of pro­tec­ting tra­di­tio­nal sec­tors. It is also about pre­ser­ving indus­trial com­pe­ti­ti­ve­ness in a world that is digi­ti­sing and decar­bo­ni­sing at high speed.” His remarks are a remin­der that the issue is not only envi­ron­men­tal, but also eco­no­mic and strategic. 

The adjust­ments made to the Euro­pean Green Deal, such as the revi­sion of emis­sion reduc­tion tar­gets and the exten­sion of dead­lines for cer­tain sec­tors, took place in a tense poli­ti­cal cli­mate in the run-up to the Euro­pean elec­tions in June 2024. In the face of gro­wing cri­ti­cism, the Euro­pean Union modi­fied cer­tain mea­sures to allay indus­trial concerns while main­tai­ning its ove­rall cli­mate ambi­tions⁵. The out­come of the elec­tion led to a poli­ti­cal reshuffle in the Euro­pean Par­lia­ment. An alliance bet­ween the right and the far-right increa­sed pres­sure on the Com­mis­sion to relax cer­tain envi­ron­men­tal regu­la­tions. This dyna­mic led to the pre­sen­ta­tion of the omni­bus direc­tive on 26 Februa­ry 2025. 

Phuc-Vinh Nguyen explains that the EU was see­king “to respond to cri­ti­cism before the elec­tions, and regu­la­to­ry adjust­ments are a way of allaying the concerns of cer­tain voters and indus­tries.” Jacques Le Cacheux qua­li­fies this ana­ly­sis, adding : “The Com­mis­sion wan­ted to show that it is lis­te­ning to indus­trial concerns. Howe­ver, this is not a pure­ly elec­tio­nee­ring manoeuvre, but a com­pro­mise bet­ween eco­lo­gi­cal tran­si­tion and short-term eco­no­mic com­pe­ti­ti­ve­ness.” In other words, these adjust­ments aim to recon­cile eco­lo­gi­cal impe­ra­tives with indus­trial needs in a context of dif­fi­cult tran­si­tion. Accor­ding to a stu­dy on EU cli­mate poli­cy by the Jacques Delors Ins­ti­tute, there is a need to main­tain this fra­gile balance to pre­serve both the com­pe­ti­ti­ve­ness of indus­tries and decar­bo­ni­sa­tion objec­tives⁶. 

In theo­ry, this regu­la­to­ry relief could bene­fit SMEs, which are often faced with bureau­cra­tic obli­ga­tions. Howe­ver, in prac­tice, it could main­ly bene­fit large com­pa­nies, which are bet­ter equip­ped to adapt to com­plex regu­la­tions. Phuc-Vinh Nguyen men­tions the cen­tral argu­ment of the reform : “Small busi­nesses suf­fer from the admi­nis­tra­tive bur­den, in par­ti­cu­lar because they do not have the human resources to com­ply with it.” Moreo­ver, “large com­pa­nies have dedi­ca­ted teams and would no doubt have found ways to adapt.” In other words, sim­pli­fi­ca­tion could main­ly enable large orga­ni­sa­tions to increase their com­pe­ti­tive advan­tage, without sol­ving the real dif­fi­cul­ties of smal­ler ones. 

Jacques Le Cacheux adds ano­ther nuance : not all SMEs are affec­ted in the same way. “There are indeed mea­sures that tar­get small and medium-sized enter­prises, par­ti­cu­lar­ly those with bet­ween 250 and 1,000 employees, which will see their obli­ga­tions redu­ced. But very small busi­nesses were not sub­ject to these regu­la­tions any­way, so it makes no dif­fe­rence to them.” Sim­pli­fi­ca­tion the­re­fore bene­fits inter­me­diate struc­tures more than the smal­lest ones. 

Aicha Fall