18 February 2025 - Remaining competitive is fundamental to Europe’s future. And implementing the European Green Deal is the best mechanism to get there. Climate change and its costs to the economy are real and set to soar. CISL's CEO, Lindsay Hooper, and the CEO of the We Mean Business Coalition, María Mendiluce, write in Reuters.
Brussels is under pressure to curb its green agenda in response to the new U.S. President Donald Trump, but slashing sustainability regulations in the name of growth is a false economy.
It will not future-proof industry, nor will it help EU cleantech companies scale globally or enable existing industries to transition in ways that secure their long-term competitiveness.
Policymakers need to be clear about the real hindrances to competitiveness in Europe. As the Competitiveness Compass, recently launched by the European Commission, rightly states, there must be simplification of red tape. Overlapping and contradictory demands and definitions should be scrapped. Appropriate support and time should be given to small and medium enterprises (SMEs). Permitting processes for clean energy should be streamlined, scaled and accelerated.
The EU executive should be very clear on what it means by its plans next month for “a far-reaching simplification of legislation on sustainable finance reporting and due diligence”, as these words have created a lot of speculation and uncertainty.
A bonfire of the rules that help companies identify risks and challenges along their supply chains helps no one. Climate-related supply chain risks are projected to cost companies up to $120 billion within the next five years.
Those companies that understand and have reported on their exposure to extreme weather and other challenges, thanks to mandatory regulations, will be best prepared to deal with these risks, saving money and resources. The EU must distinguish between policy simplifications that enhance competitiveness through sustainable investment and deregulation that rewards laggards.
By removing large swathes of regulation on sustainable finance reporting and due diligence, the EU would be doing companies a disservice. Leading businesses want an enabling policy environment – one that provides clarity, incentives and a level playing field for sustainable investment.
They know that without clear and consistent regulation, progress will be slow, investment risk will rise, and European industry will lose ground to global competitors. Businesses that have put in place reporting mechanisms are already reaping the benefits: from identifying market opportunities for their low-carbon products, to addressing geopolitical risks on procurement or understanding disaster risk in their operations and supply chain.
And while there is clear value in enhancing regulations across all areas – including sustainability and due diligence – a complete overhaul is unnecessary. Instead, targeted improvements can strengthen policy impact without undermining its core objectives.
The European Green Deal is the flagship policy of Commission President Ursula von der Leyen, and the Draghi competitiveness report insists that decarbonisation and competitiveness can go hand-in-hand. This is why the Commission should be cautious of listening to voices that might question the very aims of the Green Deal.
In a moment where many European countries are facing domestic and electoral pressures to retreat from their leadership on sustainability, the Commission should stay calm and continue to make the case for bold ambition on climate.
That decarbonisation and the growth of the cleantech market is good for business is well-understood by China. It has strategically expanded low-carbon trade, particularly in the Global South. Over the past three years, emerging economies drove 70% of China's solar, wind, and EV export growth. A decade ago, developed nations led renewable installations, but by 2023, their share had dropped to just over 20%. China’s pragmatic approach is securing markets and investment.
The simplification of red tape is only one part of a plethora of measures that the EU needs to take to become competitive. The current singling out of regulation, and particularly regulation on sustainability, as the main problem is nonsense. The growth of the global renewables sector only happened because of enabling policy action. Instead, the Commission should take a step back and examine where joined-up policy action is needed to boost business without undermining the EU’s commitment to cut emissions by at least 55% by 2030 and its pledge to reduce them by 90% by 2040.
This means focusing attention on the upcoming Clean Industrial Deal and ensuring it develops a compelling business case for the transition. New legislation must support EU companies and industries and help them to compete on the world stage.
It must put in place the structures necessary to grow the EU cleantech sector and to ensure incumbent businesses can transition. And yes, this includes reducing the red tape and providing incentives for companies to invest in new technologies.
Europe also needs a fully functioning single market. It needs a proper strategy for energy, in terms of climate change, supply and security. It needs a budget that backs competitiveness, innovation, decarbonisation and digitalisation as part of a single goal.
The Draghi report says that a minimum annual additional investment of 750 to 800 billion euros is required to achieve these objectives. Yet the debate remains focused on short-term costs rather than how to mobilise capital for long-term competitiveness.
We cannot escape the fact that while Europe debates the future of its Green Deal, China surges ahead. It already produces the majority of the world’s electric vehicles, solar panels and wind turbines, driving down global costs and expanding its influence. If Europe slows its ambition now, it risks ceding industrial and economic leadership to others.
The Green Deal was never just about climate – it is the EU’s de facto growth strategy. The global economy is shifting and those who lead the clean energy transition will shape the industries of the future. The EU must decide whether it wants to be in the game or watching from the sidelines.
First published by Reuters
