EU braces for weakening of green agenda after Omnibus deal

The agreement reached on the Omnibus legislation signals a u-turn in climate legislation at EU level, and paves the way for a further weakening of the green agenda amid growing pressure from the U.S., sources have told Gas Outlook.

On December 16th, the EU Parliament adopted the Detailed Omnibus Directive, which is part of the first Omnibus simplification package.

The agreement aims to simplify sustainability reporting and due diligence requirements to boost EU competitiveness by reforming the corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CSDDD) directives.

Specifically, the agreement increases the threshold for the CSRD to companies with over 1,000 employees and €450 million in turnover.

Moreover it increases the CSDDD threshold to companies with 5,000 employees and €1.5 billion net turnover. 

Crucially, the Omnibus also removes the obligation for companies to adopt a transition plan for climate change mitigation.

The move follows calls to boost the EU’s competitiveness and reduce the burden on companies to comply with climate legislation, amid the publication of the Draghi report in 2024, which had argued, among other things, that Europe should simplify sustainability regulation in order to boost economic competitiveness.

The final text will have to be formally approved by Council, and the directive will enter into force twenty days after its publication in the Official Journal.

“The implications of Omnibus I on the green transition are pretty significant, as the simplification reduces the sustainability information architecture in Europe,” Andreas Rasche, a professor of ESG and corporate sustainability at Copenhagen Business School told Gas Outlook.

“This will make it more difficult to distinguish leaders and laggards, and also to collect sustainability information along value chains.”

In addition, “as climate transition plans have been deleted from the CSDDD, I also expect that the adopted measures will not help much with reducing our dependency on fossil fuels.”

For Italy-based climate think tank ECCO, the move reflects the increased alignment of the European People’s Party (EPP) with far right groups as well as the growing influence of the U.S. on European climate policy.

In October, U.S. and Qatari officials sent a letter to EU heads of state urging them to reform the CSDDD.

Meanwhile, leaked documents obtained by SOMO, a Dutch NGO, highlighted lobbying action by a number of U.S. companies including some energy majors on Europe to water down EU’s climate legislation including the CSDDD.

Against that backdrop, “Italy emerges as a key country” to be leveraged as part of the  U.S. push to weaken the CSDDD and scrap Climate Transition Plans, ECCO said.

The agreement has also been marred by allegations of conflict of interest.

On December 16th, Transparency International EU and nine other civil society organisations, filed a complaint to the European Parliament’s Advisory Committee against EU Parliament’s rapporteur Jörgen Warborn for failing to disclose his role as president of Small and Medium Entrepreneur of Europe.

Member States now have until July 2028 to transpose the Directive into national law.  

“While the protections have been weakened, the core due diligence duty remains,” Nele Meyer, director of the European Coalition for Corporate Justice (ECCJ) said.

“Now the law must be implemented in a way that delivers real protection for people and the planet.”

Governments should use this process to strengthen and improve the CSDDD, ensuring that national legislation fulfils the Directive’s original purpose, the ECCJ said.

Key areas where Member States can improve on the CSDDD include lowering employee and turnover thresholds for in-scope companies so that more businesses are required to conduct due diligence; adopting robust civil liability provisions to ensure that companies can be held accountable and victims can obtain effective remedies; ensuring their civil liability regimes are of overriding mandatory application for CSDDD-related claims and requiring companies to adopt and implement climate transition plans and empower supervisory authorities to monitor compliance, it said.

Moving forward, the market is now bracing for further revisions of climate legislation.

This includes weakening the EU’s methane regulation and reforming the sustainability-related disclosures in the financial services sector (SFDR) regulation, ECCO’s senior policy advisor of sustainable finance, Beatrice Moro, told Gas Outlook.

A potential ‘energy omnibus’ might also include a reform of the Energy Efficiency (EED), Renewable Energy (RED) and Energy Performance of Buildings (EPBD) directives, she added.

Meanwhile, on December 16th the EU also unveiled plans to scrap the 2035 ban on internal combustion engine (CE) vehicles.

This further challenges Europe’s energy transition, according to Rasche.

“Although markets will move on, it takes away the pressure to act, at least for some companies,” he added.

(Writing by Beatrice Bedeschi; editing by Sophie Davies)