The EU Green Deal Is Being Dismantled, Piece by Piece

The European Union built its reputation as the world’s most ambitious climate regulator on the foundations of the European Green Deal. But by the close of 2025, those foundations are showing serious cracks. Under the banner of a ‘Simplification Package,’ Brussels has systematically weakened or delayed some of the Deal’s most consequential policies — from carbon pricing in buildings to the landmark 2035 ban on combustion engine vehicles. The rollback, shaped in part by growing far-right influence in the European Parliament, marks a pivotal — and troubling — moment for EU climate policy.

What Has Actually Changed: A Regulatory Retreat

The scale of the revisions is significant. On sustainability reporting, the EU has dramatically narrowed the scope of the Corporate Sustainability Reporting Directive (CSRD). Requirements now apply only to multinational corporations with more than 5,000 employees and revenues exceeding €1.5 billion — effectively removing thousands of mid-sized companies that were previously covered under earlier thresholds. For businesses, investors, and civil society groups that rely on comparable ESG data to make informed decisions, this is a major step backward.

On carbon markets, the expansion of the EU Emissions Trading System (ETS) to cover buildings and road transport — a critical lever for decarbonising two of Europe’s most stubborn emission sources — has been pushed back from 2027 to 2028. While a one-year delay may sound minor, it compounds existing uncertainty and sends a weak signal to the construction and automotive sectors at a moment when investment decisions need clarity, not ambiguity.

Meanwhile, the rollout of deforestation-free product regulations has been delayed until the end of 2026, with a reduced number of companies required to comply. The rules, designed to ensure that commodities like soy, palm oil, and beef sold in the EU do not contribute to global deforestation, were already considered overdue by environmental groups. Further delay undermines the EU’s credibility as a driver of sustainable global supply chains.

The 2035 ICE Ban: From Certainty to Question Mark

Perhaps the most symbolically damaging move is the formal review of the 2035 ban on internal combustion engine vehicles. This regulation was considered one of the Green Deal’s flagship achievements — a clear, time-bound signal to the automotive industry to accelerate its transition to electric vehicles. By reopening the debate, the EU has introduced exactly the kind of regulatory uncertainty that manufacturers, suppliers, and investors had been trying to plan around.

European carmakers, already navigating fierce competition from Chinese EV producers, now face a murkier policy landscape. Some industry voices have welcomed the review as pragmatic flexibility; environmental economists and climate scientists warn it risks delaying investments in clean mobility infrastructure by years. The climate policy implications extend beyond Europe: the EU’s regulatory choices carry enormous weight globally, influencing standards and timelines in markets from Latin America to Southeast Asia.

Political Pressure and the Limits of ‘Simplification’

The framing of these rollbacks as ‘simplification’ deserves scrutiny. Reducing bureaucratic burden on businesses is a legitimate policy goal. But there is a meaningful difference between streamlining compliance processes and gutting the substantive requirements that drive real-world emissions reductions and corporate accountability.

Critics — including environmental NGOs, progressive MEPs, and several EU member states — argue that the Simplification Package is less about efficiency and more about capitulating to political pressure from far-right and centre-right blocs that have gained ground since the 2024 European Parliament elections. The result is a EU Green Deal that increasingly resembles its original ambition in name only.

What This Means for Citizens, Businesses, and the Climate

• Citizens will see slower progress on cleaner buildings and transport, with carbon pricing incentives delayed and EV transition timelines uncertain.
• Businesses in the mid-market lose a level playing field: large corporations face lighter reporting obligations, reducing transparency across supply chains.
• Investors relying on standardised sustainability reporting will find it harder to assess climate risk across European portfolios.
• Global partners and developing nations that aligned their own policies with EU standards may now face a moving target.

The EU still has binding climate targets under the European Climate Law — a 55% reduction in emissions by 2030 and net-zero by 2050. But targets without robust policy instruments are aspirations, not plans. Every delay, every exemption, every review widens the gap between ambition and action.

Key takeaway: The 2025 Simplification Package is not a technical adjustment — it is a political choice. Europe’s citizens, and the planet, will bear its consequences long after the current parliamentary cycle ends.