Climate and Energy: EU Policy and Regulation Update for 28 May 2025

As policy and regulatory landscapes evolve, this publication will provide insights to navigating emerging risks and opportunities in the energy transition. Read previous issues here.

Sustainability Omnibus Package

• CEPS review presented at JURI Committee meeting raises reservations on the legislative process associated with the Sustainability Omnibus Package
• EU Parliament Committees and MEPs put forward significant amendments to the Omnibus Directive Proposal
• European Commission likely to propose several disclosure exemptions for entities with less than 750 employees
• French “non-paper” proposes 5,000 employees’ threshold for CSDDD
• EU Ombudswoman opens inquiry into the Commission’s alleged failure to comply with its Better Regulation Guidelines in preparing the Omnibus Proposal
• European Commission issues fourth Simplification Omnibus Package
• Council of the European Union presents guidance paper on Sustainability Omnibus during COREPER II meeting

European Union/International

• UN adopts new standards for Paris Agreement Crediting Mechanism
• EU and UK commit to linking emissions trading schemes
• EBA launches consultation on ESG amendments to Pillar 3 disclosures
• EU Commission adopted secondary legislation for the Net-Zero Industry Act

France

• Energy Efficiency – Focus on the French law 2025-391 concerning various provisions of adaptation to European Union law
• French Autorité des marchés financiers highlights sustainable finance work and priorities in its 2024 Annual report

Germany

• BaFin Intensifies ESG Supervision in the German Financial Sector

Sustainability Omnibus Package

13 May 2025 [EU] – CEPS review presented at JURI Committee meeting raises reservations on the legislative process associated with the Sustainability Omnibus Package

During the 13 May 2025 meeting of the European Parliament’s Committee on Legal Affairs (JURI), two researchers from the Centre for European Policy Studies (CEPS) presented the conclusions of their analysis on the Omnibus legislative proposals (full meeting recording available here, from 16:33 to 16:44).

The analysis was conducted at the request of the European Parliament and aimed at reviewing potentially overlapping reporting requirements in laws that comprise the main elements of the EU’s sustainability reporting and due diligence framework.

The researchers acknowledged the need for simplification but noted that the European Commission’s approach to date appears to have been “rushed”. In particular, the report noted that the Commission did not publish an Impact Assessment for the Omnibus directive, or take note of the economic benefits for firms that had been highlighted in previous Impact Assessments in relation to CSRD and CSDDD.

Overall, the researchers concluded that a more coherent framework was required, and that a sustained effort – aligned with the Better Regulation principles – was needed from EU institutions to reduce duplication and enhance legal clarity, particularly for SMEs and cross-border firms.

14-21 May 2025 [EU] – EU Parliament Committees and MEPs put forward significant amendments to the Omnibus Directive Proposal

The European Parliament published a set of amendments from Members of Parliament (MEPs), from the Committee on Economic and Monetary Affairs (ECON) [both MEPs and ECON amendments are available here] as well as the Committee on Employment and Social Affairs (EMPL, link available here) and the Committee on Foreign Affairs (AFET, link available here). A draft version of the ECON amendments had already been published by specialized media outlets [informal work document available here].

• The ECON suggests an alignment of the CSRD and CSDDD scopes, to a 3,000-employee threshold and 450-million-euro turnover. The amendments also seek to clarify the applicability of the employee threshold to non-EU groups, which are set to report under Article 40a of the CSRD for the first time in 2029.
• The document also suggests exempting subsidiaries of financial holding companies from reporting requirements, scraping the mandatory adoption of climate transition plans in the context of the CSDDD, and limiting mandatory ESRS data points to 100.

The EMPL and AFET Committees have expressed differing views, generally leaning toward preserving the integrity of the current legislative framework.

• The EMPL Committee expressed concern that the European Commission’s proposal “risks watering down the core elements of this newly established sustainability reporting and due diligence framework.” While recognizing the value of simplification, the Committee emphasized that it should not lead to “broad sweeping deregulation that changes the entire purposes of the previous directives”, especially because of the data challenges presented. EMPL also underscored the importance of “ensuring liability of companies and guaranteeing access to justice and legal remedies for victims of harm linked to violations of due diligence obligations.”
• The AFET Committee suggested retaining key aspects of the existing legislation. It emphasized the need to maintain a broad definition of stakeholders and to ensure that due diligence obligations extend beyond direct business relationships, taking into account sector-specific risks and operational contexts.

Amendments tabled by MEPs vary greatly depending on political allegiance, with proposals ranging from lowering the employee threshold to 500, to increasing it to 5,000. Similarly, views differ on climate transition plans, with some MEPs advocating for their removal and others calling for their reinforcement.

These proposals will be negotiated and voted on by mid-July, according to the indicative timetable that the European Parliament had set.

[May 2025] – European Commission likely to propose several disclosure exemptions for entities with less than 750 employees

A draft version of a Commission Delegated Regulation (the source of which is unverified) was published by specialized media outlets, containing amendments to Delegated Regulation 2023/2772 as regards the postponement of the application date of certain disclosure requirements under CSRD [full informal draft available here].

Under the amendment, companies in the first wave of implementation of the CSRD (i.e., public interest entities with over 500 employees reporting from financial year 2024) would benefit from a two-year deferral for certain disclosure obligations outlined in the European Sustainability Reporting Standards (ESRS), including Scope 3 greenhouse gas emissions (ESRS 1), biodiversity (ESRS 4), workforce and value chain-related disclosures (ESRS S1-S4) and numerous datapoints related to environmental and social issues.

[May 2025] – French “non-paper” proposes 5,000 employees’ threshold for CSDDD

A French “non-paper” (the source of which is unverified) was published by specialized media outlets, putting forward a 5,000 employee threshold for the CSDDD [available here].

The document calls for an increase of the thresholds for the application of the CSDDD from companies with 1,000 employees and an annual worldwide net turnover of more than €450 million to 5,000 employees and an annual worldwide net turnover of more than €1.5 billion.

It argues that setting the threshold at this level is consistent with the approach taken to the Carbon Border Adjustment Mechanism and better reflects companies’ capacity to influence global value chains and absorb compliance costs.

Framed against the backdrop of the Draghi report, the non-paper warns that mid-sized companies risk facing disproportionate burdens that could undermine their competitiveness and capacity to implement due diligence effectively.

It also recommends harmonising thresholds across the CSRD, Taxonomy Regulation and CSDDD frameworks to avoid a “threshold effect” that could trigger sudden and significant compliance cost increases.

21 May 2025 [EU] – EU Ombudswoman opens inquiry into the Commission’s alleged failure to comply with its Better Regulation Guidelines in preparing the Omnibus Proposal

Teresa Anjinho, the European Ombudswoman, has opened a formal inquiry into the European Commission’s preparation of the Omnibus Proposal [official statement available here] following a complaint submitted by several NGOs in April 2025 [for more information on this complaint, please refer to our previous edition at the following link].

The official letter to President Von der Leyen states that the complaint regards the Commission’s alleged failure to comply with its ‘Better Regulation Guidelines’ in preparing the legislative proposal to amend the CSRD and CSDDD.

Specifically targeted by the complaint are (i) the lack of a public consultation and impact assessment, without proper justification, (ii) the “rushed inter-service consultation that was not in line with its rules of procedure”, and (iii) failure to conduct a climate consistency assessment as foreseen by the European Climate Law (Regulation 2021/1119).

The Ombudswoman reminded that while some flexibility may be required in their application, any departure from the requirements set out in the Better Regulation Guidelines should always be justified. She thus requested that several documents relating to the complaint’s grievances be sent to her teams before 6 June 2025, which along with interviews should constitute the basis of the 18 June 2025 meeting.

While the office of the Ombudswoman may not require the European Commission to reverse its decisions, it may make recommendations, including a special report to the European Parliament, which much then take appropriate action.

21 May 2025 [EU] – European Commission issues fourth Simplification Omnibus Package

On 21 May 2025, the European Commission issued its fourth Simplification Omnibus package [press release available here].

Key ESG-related measures covered in Omnibus IV include amendments to the Fluorinated Greenhouse Gases (F-gas) Regulation (Regulation (EU) 2024/573) and the Sustainable Batteries Regulation (Regulation (EU) 2023/1542):

• Under the current F-gas Regulation, companies must register products and equipment containing fluorinated greenhouse gases via the EU F-gas portal. Omnibus IV proposes to narrow this registration obligation to only those imported products and equipment that meet certain reporting thresholds, including de minimis exemptions. As a result, approximately 10,000 companies are expected to be relieved from registration requirements in 2026 alone [details available here].
• The package also delays the entry into force of due diligence obligations under the Sustainable Batteries Regulation by two years, shifting the deadline from 18 August 2025 to 17 August 2027. Additionally, the Commission’s deadline to publish guidance on these due diligence requirements is extended to 26 July 2026 [details available here].

23 May 2025 [EU] – Council of the European Union presents guidance paper on Sustainability Omnibus during COREPER II meeting

The Council of the European Union presented a draft guidance paper on the Omnibus Directive during the May 23rd, 2025 meeting of the Committee of the Permanent Representatives of the Governments of the Member States to the European Union (COREPER) [full paper available here, with requests for COREPER documentation available at the following link]

As concerns the CSRD scope, the Polish Presidency indicated that it supports the 80% scope reduction put forward by the European Commission, noting that it offers a balanced approach.

As concerns the CSDDD scope, the document reflects concerns raised by several delegations about the proposed entity-based approach to due diligence, viewed as overly burdensome, despite the tier-1 limitation. The Presidency therefore proposes to clarify that, for the purposes of identifying and assessing adverse impacts, companies should only be required to take measures that are reasonably available to them. This would entail a return to the so-called “risk-based approach”, i.e., “focusing identification and assessment of actual and potential adverse impacts on areas where these impacts are most likely to occur”.

Finally, regarding transition plans for climate change mitigation, the Presidency endorsed the Commission’s proposal to simplify the provisions by aligning the wording with that of the CSRD and to replace the CS3D requirement to implement these plans with a clarification that companies’ obligation to adopt a transition plan includes the description of planned and undertaken implementing actions.

European Union/International

16 May 2025 [International] – UN adopts new standards for Paris Agreement Crediting Mechanism

On 16 May 2025, the Supervisory Body of the Paris Agreement Crediting Mechanism (PACM) adopted new standards for measuring the impact of emission-reducing projects under PACM [press release available here].

Two key standards were agreed:

• a baseline standard requiring projects to estimate emissions that would have occurred without the project, including mandatory downward adjustments to avoid over-crediting and encourage continuous improvement; and
• a leakage standard to account for unintended emission increases elsewhere.

The first methodologies under these standards are expected to be approved by the Supervisory Body by the end of the year.

19 May 2025 [EU / International] – EU and UK commit to linking emissions trading schemes

On 19 May 2025, the European Union and United Kingdom published a common understanding committing to linking their respective Emissions Trading Schemes (ETS) [available here].

The planned linkage would give effect to Article 392(6) of the post-Brexit Trade and Cooperation Agreement (“The Parties shall cooperate on carbon pricing…”), with both parties recognising that a functioning carbon market link could support level playing field objectives and facilitate mutual exemptions under their respective Carbon Border Adjustment Mechanisms. The agreement will cover “all aspects of the functioning of an ETS link” and include sectors such as electricity generation, industrial heat, industry, maritime transport, and aviation.

The agreement will be supported by a joint governance structure, a dispute resolution mechanism involving an independent arbitration panel, and provisions for appropriate UK financial contributions.

22 May 2025 [EU] – EBA launches consultation on ESG amendments to Pillar 3 reporting

On 22 May 2025, the European Banking Authority (EBA) published a consultation paper on, among other matters, proposed amendments to the ESG disclosure framework under Pillar 3 of the Capital Requirements Regulation (CRR – Regulation (EU) 575/2013) [press release available here].

The proposals follow recent CRR amendments published in the Official Journal on 1 January 2025, which expanded ESG disclosure requirements to all in-scope institutions. In response, the EBA’s consultation paper sets out a proportionate disclosure framework, featuring revised ESG disclosure templates tailored to different categories of institutions. The consultation also aims to streamline and clarify existing ESG reporting requirements, proposing measures to decrease reporting frequency for disclosures based on materiality and promote alignment with the Taxonomy Regulation (Regulation (EU) 2020/852).

Stakeholders are invited to submit feedback on the consultation until 22 August 2025, with the final implementing technical standards to be submitted to the European Commission by Q4 2025

23 May 2025 [EU] – EU Commission adopted secondary legislation for the Net-Zero Industry Act

On 23 May 2025, the European Commission introduced four new pieces of secondary legislation and a communication relating to the Net-Zero Industry Act (NZIA) (i.e., Regulation (EU) 2024/1735). The NZIA establishes a framework to ensure the EU’s access to a secure and sustainable supply of net-zero technologies by scaling up their manufacturing capacity and supply chains.

In particular, the newly adopted package includes:

• a delegated regulation identifying the specific sub-categories within net-zero technologies and the list of specific components used for those technologies;
• an implementing regulation listing net-zero technology final products and their corresponding specific components;
• an implementing decision setting out certain selection criteria for net-zero strategic projects, which benefit from “priority status” at national level, ensuring rapid administrative treatment and financial advice;
• an implementing regulation containing rules for the inclusion of certain non-price criteria in Member States’ auctions for renewable energy deployment (such as responsible business conduct, cybersecurity, and sustainability and resilience contribution); and
• a communication providing updated information to determine the shares of the EU supply of net-zero final products, highlighting third country dependencies for specific net-zero technologies.

The new rules take into account the input received via the call for feedback that took place earlier this year and the discussions among Member States in the relevant experts’ groups and comitology committees.

France

May 2025 [France] – Energy Efficiency: Focus on the French law 2025-391 concerning various provisions of adaptation to European Union law

The French Law No. 2025-391, concerning various provisions adapting national legislation to European Union law, was published in the French Official Journal [final text available here, in French only]. It introduces several amendments to articles 122-1 et seq. of the Code de l’environnement (French Environmental Code) and articles L.233-1 et seq. of the Code de l’énergie (French Energy Code).

The law incorporates several measures related to the Sustainability Omnibus Package, notably a two-year deferral of reporting obligations under the CSRD. [For more details on the Sustainability Omnibus Package aspects of the law, please refer to our previous edition at the following link]

The law also introduces energy performance measures aimed at integrating energy efficiency into project planning and mandating energy audits. These measures are grounded in the newly established principles of “energy efficiency first” and “proportionate assessment based on energy consumption.” Public entities are now required to achieve a 1.9% annual reduction in energy consumption. Key energy performance measures include:

• Projects with investments exceeding €100 million (€175 million for transport infrastructure) must undergo a proportional assessment of energy efficiency and sufficiency measures. This assessment is to be incorporated into the existing environmental assessment process to avoid additional administrative burdens.
  • Sectors subject to this requirement include both (i) energy sectors and (ii) non-energy sectors that significantly impact energy consumption and efficiency, such as building, transport, water, ICT, agriculture, and the financial sector.
• Companies with annual energy consumption over 23.6 GWh must implement an energy management system by October 2027. Companies consuming more than 2.75 GWh annually must conduct energy audits starting in October 2026, unless they have opted for energy management systems. Companies exceeding these thresholds after 2026 or 2027 must comply within one year after having exceeded the threshold for three consecutive fiscal years.
  • These obligations reflect a consumption-based targeting approach, aligning with the 2024 amendments to Article 8 of Directive 2012/27/EU on energy efficiency. In-scope companies must prepare an action plan based on audit or EMS recommendations. The plan must be published in the company’s annual report, specifying the implementation rate of its measures, and made publicly available—subject to business confidentiality. These companies must also disclose their final annual energy consumption.
• A cost-benefit analysis must be carried out for new projects or major modifications involving: (i) thermal electricity generation facilities with power capacity above 0 MW, (ii) industrial installations above 8 MW, (iii) service sector installations above 7 MW and (iv) data centres above 1 MW. This requirement, previously applicable only to facilities above 20 MW, will be further specified by an upcoming application decree.

The law also includes broader provisions aimed at aligning with EU legislation, notably:

• Green Bonds Regulation: The French Monetary and Financial Code has been amended to comply with Regulation (EU) 2023/2631 on European green bonds and optional sustainability disclosures.
• Digital Assets: Amendments align the French Monetary and Financial Code with the Markets in Crypto-Assets (MiCA) Regulation and the Pilot Regime on distributed ledger technology. A new legal framework is introduced for pledging digital assets, aimed at ensuring legal certainty for crypto-related financial transactions.
• Gender Balance in Corporate Governance: The French Commercial Code now mandates the Autorité des marchés financiers (AMF) to monitor, promote, and report on gender balance in company boards and executive committees, in collaboration with the High Council for Gender Equality.
• European Single Access Point (ESAP): The French government is authorized to legislate by ordinance within nine months to align national legislation with the EU regulation establishing ESAP for financial and sustainability disclosures.
• Access to Beneficial Ownership Information: Access to the register of beneficial owners is now limited to individuals or entities demonstrating a legitimate interest, in line with EU anti-money laundering directives and enhanced data protection requirements.

These changes are scheduled to take effect on 1 October 2025. However, specific implementing decrees are anticipated to provide further details on the application of these provisions.

26 May 2025 [France] – French Autorité des marchés financiers highlights sustainable finance work and priorities in its 2024 Annual report

The French Autorité des marchés financiers (AMF) published its 2024 Annual Report [available here, in French only], highlighting the promotion of a more sustainable finance in its “Impact 2027” priorities.

The report outlines ongoing efforts to integrate sustainability considerations into the financial sector, in line with European regulatory developments. The AMF focused on clarifying expectations for market participants, strengthening supervision, and contributing to European and international regulatory discussions on the simplification of guiding frameworks.

The report highlights the AMF’s work in supporting companies and financial institutions as they prepare for new sustainability reporting obligations under the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). It also notes actions taken to monitor the application of the EU Taxonomy and to improve the quality and reliability of ESG disclosures.

To address risks of greenwashing, the AMF carried out targeted supervisory activities, including SPOT checks of marketing documentation and “mystery shopper” visits to bank branches. These reviews assessed how well sustainability preferences were incorporated into financial advice. Results indicate that practices remain uneven, with room for improvement in how ESG criteria are presented and explained to clients.

The AMF also published a practical guide on climate transition plans for companies, and a review of non-financial reporting practices among listed firms. Together with the ACPR, it released its fourth annual report examining financial institutions’ climate commitments, with particular focus on fossil fuel financing and the implementation of transition strategies.

Internally, the AMF continued to coordinate its sustainable finance work through its dedicated unit and the Commission on Climate and Sustainable Finance. At the European level, the AMF contributed to the work of ESMA and other regulatory bodies, particularly around the implementation of CSRD, SFDR, and taxonomy-related regulations.

For the coming year, the AMF plans to maintain its supervisory focus on sustainability disclosures and product claims, while continuing to call for simplification and consistency across the evolving regulatory landscape. It has identified the implementation of CSRD as a key priority, particularly with regard to the quality and comparability of reported data.

Germany

7 May 2025 [Germany] – BaFin Intensifies ESG Supervision in the German Financial Sector

According to its 2024 Report [see here, German version], the German Federal Financial Supervisory Authority (BaFin) has significantly strengthened its oversight of sustainability factors in the financial sector. The strategic reorganization is intended to signal the regulator’s commitment to integrating environmental, social, and governance considerations into financial regulation frameworks. BaFin’s enhanced approach includes comprehensive assessment of sustainability risks across banks, insurers, and asset managers, with particular attention to greenwashing prevention and climate risk management. The regulator has announced plans to conduct more frequent ESG-related audits and has developed new methodologies to evaluate financial institutions’ sustainability management. This could result in more rigorous scrutiny of ESG claims and sustainability-related products of financial institutions operating in Germany, necessitating robust documentation and verification processes.