A weekend showdown within the European Commission prevented a significant weakening of the EU’s green finance rules, documents obtained by POLITICO reveal. The internal clash sheds light on the rising tensions over Brussels’ efforts to ease environmental regulations amid growing pressure from industry to reduce green reporting obligations.
On Wednesday, the Commission unveiled a comprehensive policy package addressing concerns from businesses that high energy prices and increasing green reporting requirements were putting them at a competitive disadvantage against global rivals like China and the United States. The proposed changes include major reductions to recently introduced green legislation, exempting most EU companies from reporting their environmental impacts, climate risk exposure, and alignment with the bloc’s sustainability criteria. These adjustments were met with immediate condemnation from climate advocates and several lawmakers. However, it was revealed that the original proposal was even more drastic.
Drafts circulating within the Commission on Friday indicated plans to make the EU’s green finance taxonomy entirely voluntary and scale back related sustainability standards. The drafts prompted backlash from several EU commissioners, leading to a revision of the proposals to the milder version that was made public on Wednesday.
Teresa Ribera, the Commission’s climate and competition chief, acknowledged the internal discord during a conference in Antwerp. “We wanted to simplify in such a way that we could still reach our climate goals without undoing the progress made in the previous mandate,” she said, admitting that some officials had pushed for even faster and deeper cuts to the green regulations.
Sources familiar with the discussions revealed more candid details. “There was a huge fight over the weekend,” one official said, speaking on condition of anonymity. “It was exhausting, but we managed to achieve the most balanced version possible.”
The dispute reflects a growing divide within Brussels over how far the EU should go in responding to industry demands for less stringent green rules, a stance promoted by Commission President Ursula von der Leyen as part of her pledge to reduce red tape during her second term. Von der Leyen has targeted two major regulations, which hold companies accountable for environmental damage across their supply chains, as well as the EU Taxonomy, the classification system that supports the bloc’s green finance initiatives.
In the initial drafts, the entire EU Taxonomy reporting system was set to become voluntary, and even the core “do no significant harm” principle—which ensures that activities do not undermine the EU’s environmental goals—was under scrutiny. The principle requires that economic activities meet at least one of the EU’s six environmental objectives, such as reducing emissions, without causing significant harm to others. In the proposed changes, certain activities were set to qualify as “sustainable” even if they harmed one of the environmental objectives, as long as the damage was deemed insignificant.
By Wednesday, the Commission had revised the proposal to maintain the “do no significant harm” principle, but with an exception for pollution prevention. Additionally, compliance with the Taxonomy would have been voluntary for all companies, including financial market participants, citing concerns over the administrative and financial burdens of mandatory reporting. The revised proposal reduces the number of companies required to report under the Taxonomy by 85%.
The Taxonomy dispute was not the only point of contention. Commissioners also clashed over a rule requiring companies to report the environmental damage they cause, with some early drafts suggesting the elimination of these obligations. The Commission did not immediately respond to a request for comment.
Despite the concessions, the ongoing internal struggles underscore the growing rift within the EU over the balance between environmental sustainability and industry interests, with the future of green finance regulation hanging in the balance.
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