Staff Report
The European Commission has unveiled its Clean Industrial Deal (CID) alongside the Omnibus package, promising to bolster industrial competitiveness and resilience. Framed as a step towards aligning climate policy with economic growth, the CID highlights the importance of decarbonization, innovation, and job creation. However, despite its ambitious rhetoric, the proposal falls short in delivering a clear path toward the EU’s climate commitments.
While the Commission acknowledges the necessity of integrating sustainability into economic strategy, its actions tell a different story. Instead of ensuring that climate goals lead industrial transformation, the package appears to favor corporate interests, delaying decisive action and omitting a firm 2040 climate target.
Missing the Mark on Climate Targets
One of the biggest shortcomings of the proposal is the absence of a binding 2040 emissions reduction target. To stay on course for climate neutrality, the EU must commit to cutting emissions by at least 92% based on gross reductions, rather than relying on net calculations that obscure actual progress.
Carbon Market Watch has urged the Commission to revise the EU Climate Law to include distinct, legally binding targets for emissions reductions, carbon sequestration through natural sinks, and permanent removals. A clear separation of these categories is essential to prevent misleading climate accounting and ensure meaningful reductions.
Moreover, the CID fails to recognize that carbon capture should only count as a removal when derived from atmospheric or biogenic sources and stored permanently. The consideration of modifying the Emissions Trading System (ETS) to incentivize removals is problematic, as it risks diverting attention from the urgent need for deep emissions cuts.
“Decarbonization efforts must be science-driven and focused on real emissions reductions, not false solutions that delay meaningful action,” stated Fabiola De Simone, policy expert at Carbon Market Watch.
Financing the Green Transition: A Missed Opportunity
While the CID outlines increased funding for decarbonization, it sidesteps the need for a complete overhaul of EU industrial subsidies. In 2023 alone, €40 billion was lost due to free pollution allowances granted under the ETS—funds that could have significantly advanced climate initiatives through the EU Innovation Fund and national programs.
Instead of maintaining these subsidies, the EU must eliminate free pollution permits and enforce the “polluter pays” principle. Furthermore, revenue from the ETS should extend beyond industrial decarbonization, funding worker reskilling, climate adaptation, and biodiversity conservation.
The proposal to establish an Industrial Decarbonization Bank is a promising step, yet its scope remains limited. For it to be truly effective, the bank should prioritize circular economy initiatives and raw material savings, ensuring industry-wide reductions in environmental impact.
Energy Affordability vs. Climate Ambitions
The Commission’s Action Plan for Affordable Energy aims to lower energy costs while accelerating the transition to renewables. Though a welcome development, it lacks a concrete timeline for phasing out fossil fuels.
By continuing to invest in gas infrastructure abroad, the EU contradicts its climate ambitions, prolonging dependence on volatile fossil fuel markets. Instead, public funds should be allocated to expanding renewable energy access, particularly in sectors like transportation and housing.
CBAM: Progress and Pitfalls
The Omnibus package includes modifications to the Carbon Border Adjustment Mechanism (CBAM), simplifying compliance for importers while still covering 99% of targeted emissions. However, significant concessions to industry players weaken its impact.
With administrative burdens reduced, there are no remaining excuses to delay CBAM implementation. Carbon Market Watch has called for its full rollout in 2026, alongside the immediate phase-out of free ETS allowances to ensure fair treatment of EU-produced and imported goods.
Additionally, future carbon pricing mechanisms must be safeguarded against loopholes. The EU must ensure that carbon offset schemes and market distortions do not allow major polluters to sidestep their obligations.
A Step Backward for Corporate Accountability
While CBAM adjustments bring some progress, the broader Omnibus package signals a worrying retreat on corporate sustainability. Revisions to the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) weaken EU leadership in climate transparency.
By extending reporting cycles and removing ongoing due diligence requirements, these changes dilute corporate accountability at a time when stronger regulations are needed. “This rollback undercuts progress on corporate responsibility and shifts power away from civil society, leaving climate action vulnerable to corporate interests,” warned Benja Faecks, policy expert at Carbon Market Watch.
The Verdict: More Industry Handouts, Less Climate Action
Despite being framed as a sustainability-driven initiative, the Clean Industrial Deal prioritizes industrial lobbying over climate urgency. By failing to set clear 2040 climate targets, maintaining pollution subsidies, and diluting corporate accountability, the European Commission has sent a mixed signal on its commitment to environmental integrity.
To align with its climate goals, the EU must take decisive action—ending free pollution permits, enforcing stronger climate laws, and ensuring that industrial policies serve the public good rather than private interests. Without these changes, the CID risks becoming yet another policy that favors big polluters while leaving the fight against climate change in limbo.
