Amid tariff disputes, the war in Ukraine and environmental problems, Europe is looking for a new direction for its economic strategy. A key question is what role environmentally friendly production, agriculture and the protection of natural resources should play in the future.
Through its 2019 Green Deal, the EU has been working towards making its industries more efficient and climate-neutral by 2050. But the plan is facing increasing criticism and pressure. Not least from the conservative EPP group in the EU Parliament, which is seeking to gain majorities with the help of far-right parties.
Several resolutions are currently being watered down, while the implementation of certain measures is being postponed or even completely rolled back.
Loosening of reporting obligations for companies
Two central instruments of the Green Deal are the EU Supply Chain Act and companies’ obligations to report on their own social and environmental impacts. The aim being to ensure comparability and make responsibilities visible.
Until now, some 50,000 EU companies with a workforce of at least 250 were obliged to prepare such reports annually. But company complaints about the regulation burdening them with bureaucracy and tying up too many resources means small and medium-sized companies will no longer be required to report.
The rule is now set to apply exclusively to major corporations with a turnover of hundreds of millions of euros.
Critics say fewer reporting obligations mean less transparency, both for the public and for investors who support sustainable practices and want to avoid environmentally harmful or unethical business models.
The European Central Bank (ECB) had warned in advance that the discontinuation of these reports could lead to a regulatory imbalance. In a letter to the Commission, it emphasized that climate change has a “profound impact on price stability” and requires a sufficiently robust database to manage financial risks.
In the ECB’s view, this database would be jeopardized if the number of companies subject to reporting requirements were to be reduced by up to 80% — as is currently planned in the package.
Less monitoring of supply chains
The adoption of the so-called simplification package has also resulted in weakened rules for the Supply Chain Act.
This should include thousands of large companies from high-risk sectors such as the textile industry, fishing or mining industries that produce for the EU market.
Companies along the entire supply chain were to be obliged to recognize, curb and end human rights and environmental violations. This goal has now been significantly watered down.
The rules now only apply to multinational companies with more than 5,000 employees and a turnover of at least €1.5 billion ($1.7). Also, victims of environmental and human rights violations along the supply chain don’t have a right to sue. And companies no longer have to present their own climate strategies, as was originally intended.
Products not linked to deforestation? Not yet
The 27 EU member states had also agreed on rules aimed at protecting forests. Products such as tea, coffee, soy and beef were only to be available for sale in the EU if verifiably not linked to deforestation.
The idea was to ensure companies acted responsibly in protecting forests, particularly in agriculturally-intensive regions such as Brazil and Indonesia.
However, the introduction of the new rules has been postponed until the end of 2026. In addition, significantly fewer companies will have to prove their products are manufactured in deforestation-free ways.
To put this into context, the Food and Agriculture Organization of the United Nations estimates that around 420 million hectares of forest — an area larger than the EU — were logged between 1990 and 2020. EU consumption accounts for around 10% of global deforestation, with palm oil and soy making up more than two-thirds of this. Forests store carbon and are extremely important for biodiversity.
Weakening environmental regulations for agriculture
Around a third of the entire EU budget goes to agriculture, the majority in the form of subsidies. The bloc’s rules for more sustainable food production have long been a thorn in the side of large farms.
Here too, politicians are also increasingly giving in. In 2023 and 2024, farmers protesting stricter rules around the use of pesticides led to them not being adopted. The Nature Conservation Act, which provided for greater protection of ecologically important peat lands, was massively watered down. Farms were originally supposed to contribute to this goal.
In a series of proposals aimed at simplifying bureaucracy for farmers and deregulating the agricultural sector, the main focus is on weakening environmental rules. For example, inspections of environmental standards are to be limited to a maximum of once per year.
Overall, significantly more natural landscapes across Europe are to be permitted to be converted to arable land than previously planned. At the same time, small farms with up to ten hectares of land are to be given access to subsidies without having to meet certain environmental standards.
Sustainability strategies in agriculture were also supposed to be continuously adapted to new environmental regulations. But that is no longer mandatory, meaning EU farms will have to do less for the environment in future, despite the major role of agriculture on the climate.
Cut-off date for new combustion engine cars postponed
The EU decision to stop the production of combustion engine cars within the bloc from 2035 could be history before it has even come into force.
The German government has voiced loud opposition to the deadline and the country’s car industry has always been against the decision. Now the EU has officially decided to “review” the end of the combustion engine, leaving a question mark over when a ban will come into force.
In the short term, this could benefit the European car industry, which continues to rely heavily on combustion engines. But with the trend towards electric vehicles predicted to continue, experts see better long-term opportunities for car manufacturers that offer EVs.
Less climate commitments at home
The European climate targets are also being cut further. In order to avoid even more extreme climate catastrophes, the EU’s Scientific Advisory Board recommended a reduction in emissions of 90% to 95% by 2040 compared to 1990 levels.
Just last month, the EU agreed on its climate targets, including a 90% cut in carbon emissions. But there is a catch. Parts of these emissions reductions can be offset through measures taken in other countries that are financed by the EU.
In other words, the EU actually only has to reduce its own emissions by 85%, as it can buy up to 5% through things such as reforestation projects abroad.
The target can also be amended further if there are difficulties with implementation. At the same time, member states decided to postpone the start of carbon pricing in the buildings and transport sector (ETS 2) from 2027 to 2028.
This article was originally published in German.
