Climate and Energy: EU Policy and Regulation Update for 17 September 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

• EFRAG Vice-Chair raises concerns over CSRD scope reduction
• European Commission responds to EU Ombudswoman’s inquiry over compliance with procedural requirements regarding the Omnibus Package
• European Commission President discusses competitiveness and climate objectives in State of the Union Address
• European Parliament adopts Omnibus Package amendments to the EU carbon leakage instrument under CBAM

European Union/International

• SBTi launches consultation for Power Sector Net-Zero Standard, amid industry backlash
• ESAs publish fourth annual report on the extent of voluntary disclosure of PAIs under SFDR, highlighting progress from financial market participants
• SEC Chair raises concern over the impact of ISSB on IASB funding and questions European sustainability reporting requirements
• European General Court dismisses challenges to the “green” labelling of fossil gas and nuclear power under the EU Taxonomy
• ESMA publishes updated 2025 IFRS Taxonomy for European Single Electronic Format
• EIB announces €17.5 billion financing pledge for energy efficiency and decarbonization projects for SMEs

Germany

• Frankfurt am Main Regional Court grants injunction against Apple’s CO2-neutrality advertisements
• German Federal Government approves draft legislation amending reporting obligations under the German Supply Chain Law (“LkSG”)

Sustainability Omnibus Package

2 September 2025 [EU] – EFRAG Vice-Chair raises concerns over CSRD scope reduction

In an interview with specialist publication Responsible Investor, European Financial Reporting Advisory Group (EFRAG) Vice-Chair Ms. Kerstin Lopatta expressed concerns about potential changes to the CSRD.

Lopatta characterized the ongoing efforts to reduce the CSRD’s scope as “counterproductive” to the directive’s fundamental objectives. She also voiced her support for maintaining the current 500-employee threshold.

Lopatta further highlighted a potential regulatory gap, noting that certain companies previously required to report under the Non-Financial Reporting Directive (NFRD) might find themselves exempt from reporting obligations should proposed amendments under consideration be adopted – particularly those advocating for a 3,000-employee threshold.

9 September 2025 [EU] – European Commission responds to EU Ombudswoman’s inquiry over compliance with procedural requirements regarding the Omnibus Package

The European Commission has issued a response to the EU Ombudswoman’s inquiry regarding the Commission’s alleged failure to comply with its Better Regulation Guidelines in preparing the Omnibus Proposal [full letter available here]. For additional context on this matter, please refer to our previous issues here, here, here and here.

The EU Ombudswoman, Teresa Anjinho, had in particular asked the Commission to justify the lack of impact assessment, public consultation, or climate consistency assessment, and the use of a 24 hours interservice consultation under the fast-track procedure.

The Commission explained that the Better Regulation Guidelines should be applied proportionally as they are not legally binding, and allowed for the possibility to publish a staff working document rather than an impact assessment where there is urgency to act. The Commission justified the factual urgency for the Omnibus Proposal based on “the general economic climate that had deteriorated dramatically since the adoption of the CSRD and CSDDD”, and in view of the transposition and implementation timelines of both Directives.

This urgency – combined with the inherent flexibility of the Better Regulation Guidelines – also justified the absence of a public consultation and the 24-hour interservice consultation, as the Commission Rules of Procedure allow for derogation from the standard 48-hour requirement for fast-track written consultations.

Concerning the climate consistency assessment, the Commission contended that, contrary to the Ombudswoman’s assertion, it had indeed conducted such an assessment and had summarized its findings in both the staff working document and the explanatory memorandum.

10 September 2025 [EU] – European Commission President discusses competitiveness and climate objectives in State of the Union Address

European Commission President Ursula von der Leyen delivered her annual State of the Union address to Members of the European Parliament (MEPs), focusing in particular on security and competitiveness [full transcript available here].

President Von der Leyen, emphasizing that the EU’s independence will depend on its ability to compete in a turbulent geopolitical landscape, noted that the Commission was “tackling the key bottlenecks identified by the Draghi report”, including energy, capital, investment, and simplification” and underscored that “To protect jobs, we need to make business in Europe easier.” She positioned the forthcoming Omnibus Proposals as instrumental in achieving this objective, projecting annual savings of €8 billion in bureaucratic costs for European companies.

Regarding environmental achievements, President von der Leyen reported that low-carbon sources now constitute 70% of the EU’s electricity generation. She confirmed the bloc remains on track to meet its 2030 target to cut emissions by at least 55%. She also mentioned the Commission’s proposal to implement 2040 targets, in an effort to stay the course on the EU’s climate and environmental goals.

The address was followed by a debate with MEPs [a summary of which is available here].

10 September 2025 [EU] – European Parliament adopts Omnibus Package amendments to the EU carbon leakage instrument under CBAM

The European Parliament formally adopted at first reading a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism (CBAM) [resolution available here].

These amendments, part of the Omnibus I simplification package, establish a new de minimis mass threshold whereby imports up to 50 tons per importer per year will not be subject to CBAM rules – thus exempting 90% of SMEs and individuals importing only small quantities of goods covered by CBAM.

For imports still subject to CBAM, the rules have been streamlined regarding the authorization process, emissions calculation methodology, verification procedures, and financial liability requirements for authorized CBAM declarants.

The amending Regulation now awaits official endorsement by the Council of the European Union before it can be published in the EU Official Journal and enter into force three days later.

European Union/International

2 September 2025 [International] – SBTi launches consultation for Power Sector Net-Zero Standard, amid industry backlash

The Science Based Targets initiative (SBTi) has released the inaugural draft of its Power Sector Net-Zero Standard for public consultation, with submissions accepted until 3 November 2025 [consultation paper available here].

The proposed standard aims to enable power-sector companies to set near-term and long-term science-based targets that are both practical and aligned with what is needed to reach net-zero by 2050 at the latest.

This announcement comes in a context marked by the withdrawal from net-zero commitments of several financial market participants, and a letter from 23 U.S. Attorney Generals questioning the legality of net-zero carbon emissions standards.

The letter, dated 8 August 2025 [available here] claimed that making net zero a goal actively harmed American citizens, and that SBTi and the financial institutions that commit to its Standards risk violating federal and state antitrust laws as well as state consumer protection laws. Iowa’s Attorney General, who acted as main signatory, requested SBTi’s CEO to provide several documents and information, including all communications between SBTi and its members relating to how the commitments would be met.

9 September 2025 [EU] – ESAs publish fourth annual report on the extent of voluntary disclosure of PAIs under SFDR, highlighting progress from financial market participants

The Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) published its fourth Annual Report on the extent of voluntary disclosure of principal adverse impacts (PAIs) under SFDR [full report available here].

The Report emphasized a consistent enhancement in PAI voluntary disclosure quality since the implementation of SFDR – with improvements observed at both entity and product levels. Disclosures are said to have improved significantly in terms of clarity, quality and completeness. The analysis reveals that financial market participants within larger multinational groups tend to provide more detailed disclosures, while smaller entities tend to incorporate general ESG or marketing content within their SFDR reporting frameworks.

The Report also provides practical guidance, ranking disclosure practices as good, below average, or non-compliant. The ESAs have also included targeted recommendations for National Competent Authorities (NCAs) to support their supervision of PAI disclosures, and for the European Commission to consider ahead of the forthcoming review of the SFDR.

10 September 2025 [International] – SEC Chair raises concern over the impact of ISSB on IASB funding and questions European sustainability reporting requirements

Securities and Exchange Commission (SEC) Chairman Paul S. Atkins delivered a keynote address before the Inaugural OECD Roundtable on Global Financial Markets, signaling potential changes to how the SEC handles foreign companies’ financial statement reconciliation, due to funding concerns at the International Accounting Standards Board (IASB) [full speech available here].

Since 2007, the SEC has allowed foreign companies seeking to list shares on U.S. national exchanges to submit financial statements prepared in accordance with the International Financial Reporting Standards (IFRS), as issued by the IASB, without requiring reconciliation to U.S. Generally Accepted Accounting Principles (GAAP).

Atkins explained that this was agreed upon in part because of the IASB’s sustainability, governance structure, and ability to secure stable funding as an independent standard-setter. However, with the IFRS Foundation now responsible for funding both the IASB and the recently established International Sustainability Standards Board (ISSB), the SEC has expressed concern that this dual mandate could divert critical resources and attention from the IASB’s core accounting mission. Atkins encouraged the IASB to promote high-quality accounting standards that are “focused solely on driving reliable financial reporting and are not used as a backdoor to achieve political or social agendas”. He further warned that inadequate funding for the IASB could prompt the SEC to review its 2007 decision.

Additionally, Atkins voiced his “significant concerns” with the prescriptive nature of the CSRD and CSDDD and their regulatory burden on U.S. companies. While acknowledging EU efforts to streamline these frameworks, Atkins stressed that further refinement is necessary to refocus regulatory approaches toward financial materiality rather than double materiality principles.

10 September 2025 [EU] – European General Court dismisses challenges to the “green” labelling of fossil gas and nuclear power under the EU Taxonomy

Act (2021/2139) and the Taxonomy Complementary Climate Delegated Act (2022/1214) – upholding the current Taxonomy classification of nuclear power and fossil gas.

In the first ruling [Austria v. Commission, available here], the Court dismissed the Austrian government’s attempt to annul the Taxonomy Complementary Climate Delegated Act. Austria had argued that the Commission exceeded its authority by incorporating nuclear energy and fossil gas into the sustainable investment scheme, and had failed to comply with the do no significant harm (DNSH) criteria. The Court rejected the claims and specified that:

• The Commission was entitled to adopt the Taxonomy Complementary Climate Delegated Act – as the technical screening criteria set out in the Act were not essential elements of the Taxonomy Regulation and could therefore be subject to delegated legislation;
• The Commission was entitled to determine that economic activities in the nuclear energy and fossil gas sectors could, under certain conditions, contribute substantially to climate change mitigation and climate change adaptation; and that
• Transitional activities within the meaning of the Taxonomy Regulation may include both non-low-carbon activities lacking technologically and economically feasible alternatives, as well as low-carbon activities that do not satisfy the conditions under Article 10(1) of the Taxonomy Regulation.

In the second decision [ClientEarth v. Commission, available here], the Court dismissed an attempt from NGO ClientEarth to require an internal review of the Taxonomy Climate Delegated Act. ClientEarth had objected to the Commission’s classification of economic activities related to bioenergy, the manufacture of organic base chemicals and the manufacture of plastics in primary form as environmentally sustainable.

11 September 2025 [EU] – ESMA publishes updated 2025 IFRS Taxonomy for European Single Electronic Format

The European Securities and Markets Authority (ESMA) published its Final Report on the draft RTS amending Delegated Regulation (EU) 2019/815 as regards the 2025 update of the taxonomy for the European Single Electronic Reporting (ESEF) [report available here].

One key change is the introduction of IFRS 18, namely “Presentation and Disclosure in Financial Statements” aimed at replacing IAS 1 “Presentation of Financial Statements”. The new standard will be effective for annual reporting periods from 1 January 2027, with earlier application allowed. The Draft Final Report proposes to include both IAS 1 and IFRS 18 in the RTS on ESEF, to enable a smooth transition.

Additionally, IFRS 19, i.e., “Subsidiaries Without Public Accountability” was also introduced, which ESMA say will help digitalize reporting for non-listed subsidiaries.

The 2025 taxonomy will become mandatory for annual financial reports covering financial years starting on or after 1 January 2026 – but issuers may apply it voluntarily for their 2025 reports if the RTS on ESEF is adopted in time. However, the taxonomy elements for IFRS 18 and IFRS 19 may only be used once these standards have been formally endorsed at EU level – which is expected to be finalized in early 2026.

11 September 2025 [EU] – EIB announces €17.5 billion financing pledge for energy efficiency and decarbonization projects for SMEs

The European Investment Bank (EIB) announced that it would be providing €17.5 billion in funding over the next three years for the energy efficiency for small and medium-sized enterprises (SMEs) initiative – led by the EIB and supported by the European Commission [press release available here].

The EIB said that more than 350,000 businesses will receive support through the initiative, with energy efficiency and decarbonization steps backed using a combination of existing and new financial products, including debt and equity instruments.

Germany

26 August 2025 [Germany] – Frankfurt am Main Regional Court grants injunction against Apple’s CO2-neutrality advertisements

The Frankfurt am Main Regional Court has issued an injunction prohibiting Apple from advertising CO2-neutrality claims regarding Apple Watches, following legal action initiated by a German environmental organization [see press release here, in German only].

In June 2025, a German NGO filed suit against Apple, alleging greenwashing practices in the company’s use of “CO2-neutrality” terminology in marketing materials.

The court ruled in favor of the plaintiff, considering that the ads constituted misleading consumer communication [for more information, please refer to our previous issue here]. The reasoning was that measures taken by Apple to compensate the CO2 emissions caused by the production of the smartwatches were not pursued for a sufficiently long period of time.

According to the court, a consumer expects “CO2-neutrality” representations to guarantee compensation measures extending approximately until 2050 – whereby it is the opinion of the court that the measures put forward by Apple were sufficiently secured only until 2029.

3 September 2025 [Germany] – German Federal Government approves draft legislation amending reporting obligations under the German Supply Chain Law

The German Federal Government approved a draft legislation amending the German Supply Chain law (LkSG) which had established due diligence obligations for corporations regarding the observance of human rights and environmental protection in various supply chains [draft legislation available here].

In accordance with the coalition agreement – and in response to significant criticism targeting the bureaucratic burden for companies – the draft legislation abolishes the reporting obligations under the LkSG, while preserving established due diligence requirements. The sanctions regime has been refined to focus on violations of fundamental obligations.