Misguided attempts by Brussels to appease the Trump administration on trade are not only futile but also run counter to the EU’s environmental responsibility and undermine the bloc’s climate action.
With a view to ending the escalating tariff war, the European Union and the United States signed last week a framework agreement on trade which US President Donald Trump is already threatening to tear up before the ink has even dried due to the EU’s stricter digital rules.
Among other things, last week’s deal has the EU promising to purchase vast amounts of US fossil fuels and military hardware, as well as to relax regulation on American cars and water down its green rules to safeguard that they “do not pose undue restrictions on transatlantic trade”.
These include a slew of EU green laws, such as the Deforestation Regulation, which aims to ensure that goods entering the EU do not cause deforestation, the Corporate Sustainability Reporting Directive, which imposes sustainability reporting requirements on large corporations, and the Corporate Sustainability Due Diligence Directive, which requires companies to ensure that their supply chains do not adversely harm the environment or violate human rights.
“Now is not the time to start dismantling pieces of legislation underpinning the EU’s Green Deal. We are in a critical decade and stronger – not weaker – sustainability rules are essential if we are to remain on a Paris Agreement-aligned trajectory and avoid crossing irreversible tipping points,” argues Lindsay Otis Nilles, an expert on global carbon markets at CMW.
What the frack?
In the framework agreement, the European Union pledges to purchase an unspecified amount of military hardware and $750 billion of US liquefied fossil gas, oil and nuclear energy products.
This promised buying spree not only undermines the EU’s quest for energy security as it weans itself off Russian gas, it also diverts vital investment away from renewables and into some of the dirtiest types of fossil fuels. The United States is dependent on the destructive and polluting practice of hydraulic fracturing (fracking) to produce some two-thirds of its crude oil and over three-quarters of its fossil gas output.
“This deal goes against all the climate objectives European policymakers have been supporting in recent years,” points out Lidia Tamellini, CMW’s expert on EU industrial decarbonisation. “This agreement can’t but cast a shadow on the ability of the European Union to be credible in its pursuit of global leadership in climate action.”
Trouble at the border
Another problematic dimension of the draft deal relates to the EU’s Carbon Border Adjustment Mechanism (CBAM), which will impose a levy on the greenhouse gas content of goods entering the bloc that have not been subject to a carbon price.
Although the CBAM is encouraging other trading partners – such as China, Turkey, Japan, Mexico and Brazil – to unveil plans or express their intentions to apply their own carbon prices, the EU has buckled to US pressure and is offering to increase flexibilities and exemptions, even though the mechanism will have negligible effects on US trade. CBAM will cost US exporters only €17 million in 2027 and €92 million in 2035, according to a projection by Sandbag.
In addition to exempting importing SMEs from CBAM while covering 99% of emissions, the framework agreement promises “additional flexibilities” for exporters. “Multinational companies and big market actors are to blame for the overwhelming majority of emissions at stake: no further concessions are needed for the CBAM to work as intended,” emphasises Tamellini. “These ‘flexibilities’ have only been promised to the US, while developing and fragile economies have yet to receive reassurances on the impact the CBAM will have on their economies and industrial transformation.”
Instead, Tamellini urges EU leaders to make CBAM “globally fair” by “committing to reinvest CBAM revenues in international climate finance”.
Protecting the polluters
Although this deal is cast in language with wiggle room for the EU and may ultimately never see the light of day, given the fickle nature of the US president, it does indicate a troubling tendency on the part of the EU to appease rather than stand up to the Trump administration.
In addition, this latest blow to the European Green Deal and the EU’s climate ambition is not an isolated incident but follows on the heels of a broader domestic deregulatory drive ostensibly aimed at appeasing the demands from incumbent European industry. Earlier this year, for instance, the European Commission launched the so-called Clean Industrial Deal, designed to support big polluters while rolling back environmental policies.
The Omnibus package accompanying the Clean Industrial Deal included a blueprint for dismantling harmonised civil liability rules for due diligence failures by allowing for 27 different national regimes, which would likely result in diverging interpretations across the bloc. Such fragmentation could result in a lack of clarity and legal uncertainty for businesses, which is the opposite of true “simplification”. In addition, the Omnibus has proposed weakening the requirement for companies to implement transition plans.
“The EU’s steady abandonment of its previous prioritisation of green rules, both domestically and globally, demonstrates that it is no longer the environmental leader we believed it was just a few years ago,” concludes Otis Nilles.
