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Climate change - all eyes on the EU Commission

Mark Lumsdon-Taylor Jul 1, 2025

Despite the Global Geological Organisation’s damning report on climate change for 2024, the European Union has recently presented options to member states for ways to ease the proposed 2040 climate target. This aligns to other recent EU initiatives to reduce legislation and amend some of the more ambitious environmental rules following political resistance.

In order to reach a proposed 90% reduction of emissions against 1990 levels by 2040, the EU Commission has suggested that Member States may be allowed to count carbon credits towards the goal. This includes the ‘negative’ emissions from carbon capture and storage. Alternatively, Member States may be allowed to ‘soften the curve’ of the trajectory towards net zero by allowing deeper emission reductions further down the track. A further option for supporting countries in reaching the 90% goal might be to allow faster-moving sectors to account for more emissions reductions instead of forcing industries that struggle to decarbonise.

The Commission’s intention had been to present the target in February but it has been delayed until ‘before the summer’, most likely before 21st July.

EU countries are legally committed to achieve a 55% emissions reduction by 2030 (the genesis of the EU Fit for 55 initiatives) and to achieve net zero by 2050. It is the interim, 2040 target, that has proven to be most challenging.

With war in Ukraine, a trade tariff tussle with the United States, some lukewarm EU member state economies and a greater emphasis on defence spending, it seem that tackling climate change may have fallen victim to other pressing priorities.

Mark Lumsdon-Taylor
Partner, ICAEW, ACA, MSc Sustainable Accounting & Finance, BSc LLB Law & Economics
MHA

Recently, under pressure from car manufacturers, full compliance with emissions targets has been delayed for the years 2025 to 2027 and work on reviewing the 2035 ban on new combustion-engine cars has been accelerated.

The EU Commission’s 2040 options have been circulated to the EU’s 27 Member States ahead of a 2040 proposal being announced. Whilst the EU Commission has determined that it is ‘staying the course’ regarding the Green Deal objectives but has qualified that determination, stating that ‘sustainability and competitiveness should go hand in hand’.

Various business groups have welcomed the change in direction and, although many believe that European companies are beyond the point where they do not wish to decarbonise, they do expect support in both infrastructure and governance from policymakers.

The response from climate organisations has been one of horror at what they see as a softening of EU ambition, with many having written to the EU Commission, warning against changing legislation that has already been agreed.

In that vein, softening reporting rules may also increase the risk of liability for EU governments and companies, with some claiming that a weakening of sustainability due diligence requirements may mean Member States failing to meet their legal obligation to regulate corporate greenhouse gas emissions.

At a time when corporate lawsuits abound, it is also possible that such a softening may increase the risk of companies being sued for greenwashing, thereby undermining legitimate climate change efforts and potentially weakening climate change mitigation resolve.

The decision by US president Trump to withdraw from the Paris Agreement, is likely to contribute to a more general weakening of resolve, not least because the United States is one of the world’s biggest GHG emitters.

As campaigners look to the EU and China to strengthen their resolve in the face of America’s withdrawal, the nature of the 2040 options finally agreed could be a turning point for climate change commitment.

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