Climate and Energy: EU Policy and Regulation Update for 7 January 2026
January 7, 2026
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
- European Commission publishes Environmental Omnibus package
- Civil society organizations submit formal conflict-of-interest complaint against Omnibus I Rapporteur
- European Parliament formally adopts first reading position on the proposal for an Omnibus Directive
- European Commission adopts implementing and delegated regulations on upcoming CBAM
- European Commission publishes draft notice on Taxonomy Omnibus Delegated Act
- EFRAG publishes sustainability-related guidance and advice
- ESMA publishes study on the impact of its Guidelines on fund names
- Federal Government announces modifications to the national greenhouse reduction quota
- Federal Government publishes Federal Report on Energy Research
- Sustainability insights from the Italian Corporate Governance Committee’s 2025 annual report and recommendations for 2026
- Sustainable Finance Roundtable publishes interoperability table mapping the SME-Banks Dialogue Document on Sustainability against the European VSME
Sustainability Omnibus Package
10 December 2025 [EU] – European Commission publishes Environmental Omnibus package
The European Commission published the Environmental Omnibus package, i.e., a package of legislative proposals to simplify EU environmental legislation relating to industrial emissions, the circular economy, environmental assessments and geospatial data [full package available here].
The Environmental Omnibus package follows the Commission’s July 2025 call for evidence on proposals to further simplify environmental legislation, and October 2025 announcement through its work program that environmental administrative burdens would be targeted by simplification initiatives in 2026. It was published with a related press release [here], Q&A [here], communication [here] and factsheet [here].
The proposed regulations and directives presented in this context aim at (i) simplifying requirements and reducing administrative burden [proposed directive and regulation available here and here, respectively], (ii) suspending the application of certain rules with respect to waste and packaging regulations [proposed directive and regulation available here and here, respectively], (iii) speeding up environmental assessment [proposed regulation available here], and (iv) simplifying certain requirements for the establishment of the Infrastructure for Spatial Information [proposed regulation available here].
Next steps include submitting the proposals to the European Parliament and the Council for adoption.
15 December 2025 [EU] – Civil society organizations submit formal conflict-of-interest complaint against Omnibus I Rapporteur
Transparency International EU, alongside other civil society organizations, submitted a formal complaint to the European Parliament’s Advisory Committee [available here] regarding Jörgen Warborn’s alleged failure to disclose a potential conflict of interests. M. Warborn currently acts as the European Parliament’s Rapporteur for the Omnibus I proposal.
According to the Member of European Parliament (MEPs) code of conduct, all MEPs must detect, declare, and seek to resolve any conflicts of interest. The complaint notes that the potentially conflicting roles of M. Warborn as both President of SME Europe – a lobby organization listed on the EU Transparency Register – and Rapporteur for the Omnibus I package, were not disclosed in the mandatory transparency form.
The Advisory Committee is the body responsible for the safekeeping of the code of conduct, consisting of 8 MEPs. There is no set timeline in which it has to investigate a complaint.
16 December 2025 [EU] – European Parliament formally adopts first reading position on the proposal for an Omnibus Directive
The European Parliament adopted its first reading position on the European Commission’s proposal for an Omnibus Directive reducing the scope of both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) [final adopted text available here].
On 13 November 2025, the European Parliament had adopted its negotiating position [see our previous edition, here]. An adjusted version had been published by the Council of the EU on 9 December 2025, reflecting the trilogue negotiations, and had received Coreper II approval on 10 December 2025.
The CSRD will now apply only (i) on the one hand, to EU companies with over 1,000 employees on average, and over €450 million net turnover, (ii) on the other hand, to non-EU companies with over €450 million net turnover in the EU, and to their subsidiaries and branches with over €200 million turnover in the EU.
The CSDDD will now apply to EU companies with more than 5,000 employees and a net worldwide turnover of more than €1.5 billion, along with non-EU companies having a net EU turnover of more than €1.5 billion. This new threshold sets aside the initially proposed alignment of CSRD and CSDDD’s scopes.
Among other streamlining measures, CSDDD transition plans will no longer be required and firms with fewer than 1,000 employees will not have to provide information to their bigger business partners beyond what is included in the voluntary reporting standards, in the context of CSRD reporting.
The Council of the EU must now formally adopt the Simplification Directive before it can be published in the Official Journal. It will then enter into force 20 days later, with transposition required within 12 months for most provisions.
17 December 2025 [EU] – European Commission adopts implementing and delegated regulations on upcoming CBAM
The European Commission adopted implementing and delegated Regulations on the EU Carbon Border Adjustment Mechanism (CBAM), for the launch of its definitive phase from 1 January 2026, when the full CBAM requirements will start to apply [find press release here].
CBAM is a system of carbon certificates for the embedded greenhouse gas (GHG) emissions in certain products being imported into the EU. Pursuant to CBAM requirements, EU importers of in-scope goods must buy carbon certificates corresponding to the carbon price that would have been paid had the goods been produced in the EU. The definitive phase of CBAM requires in-scope importers to apply to be authorized CBAM declarants.
The new implementing and delegated regulations are aimed at extending the scope of CBAM to 180 downstream steel and aluminum-intensive products from 1 January 2028 to reduce the risk of carbon leakage at later stages in the supply chain. These regulations also introduce anti-circumvention measures, including additional reporting requirements.
An additional European Commission proposal [available here] sets forward a decarbonization fund aimed at temporarily supporting EU producers of CBAM goods, by reimbursing a portion of EU Emissions Trading System costs for goods that are still at risk of carbon leakage.
18 December 2025 [EU] – European Commission publishes draft notice on Taxonomy Omnibus Delegated Act
The European Commission has published a draft commission notice containing FAQs on the interpretation and implementation of certain provisions of the Disclosures Delegated Act (EU) 2021/2178, as amended by the Omnibus Delegated Act [draft notice available here].
The Disclosures Delegated Act of 6 July 2021 specifies the disclosure obligations of undertakings under Article 8 of the Taxonomy Regulation as regards those of their activities that are Taxonomy-eligible and Taxonomy-aligned. The Omnibus Delegated Act, adopted by the European Commission on 4 July 2025, will apply from 1 January 2026, and contains amendments intended to simplify certain elements of the Disclosures Delegated Act. The draft notice intends to clarify both regulations, and amendments made.
The notice contains FAQs, among others, on the materiality approach to taxonomy reporting, or on the interpretation of the two-year opt-out set out in Article 7(9) of the Disclosures Delegated Act. In particular, it provides that, for the 2025 financial year, reporting undertakings can choose between (i) applying the version of the reporting rules as amended by the Omnibus Delegated Act and that enter into application as from 1 January 2026, or (ii) applying the version of the reporting rules that were applicable until 31 December 2025, but must then apply these rules in full.
The European Commission simultaneously published a press release [available here] stating that the FAQ will be adopted in all EU languages in the first quarter of 2026, following the publication of the Omnibus Delegated Act in the Official Journal.
European Union/International
11-17 December 2025 [EU] – EFRAG publishes sustainability-related guidance and advice
The European Financial Reporting Advisory Group (EFRAG) has published several documents supporting sustainability reporting. From 11 to 17 December, this has included supporting guidance, a comment letter, a discussion paper and an endorsement advice.
On 11 December 2025, EFRAG published three supporting guides to help SMEs report on disclosures identified as particularly challenging in the public consultation and field test on VSME [available here].
On 12 December 2025, EFRAG published its comment letter on two exposure drafts from the International Sustainability Standards Board (ISSB) [available here]. The ISSB exposure drafts concerned relate, respectively, to (i) Proposed amendments to the SASB Standards [available here] and (ii) Proposed Amendments to the Industry-based Guidance on Implementing IFRS S2 [available here].
On 17 December 2025, EFRAG published a discussion paper on the connectivity of financial and sustainability reporting [available here]. It highlights that connectivity is improving even though companies are still in the early stages of applying the concept and identifies current gaps (such as inconsistent terminology and possible underreporting). It also provides 17 real-world illustrations from company reports [available here], which demonstrate practical instances of connectivity between sustainability disclosures under ESRS or ISSB Standards and financial statements under IFRS Accounting Standards.
On 17 December 2025, EFRAG issued its final endorsement advice on the Amendments to IFRS 19 Subsidiaries without Public Accountability: Disclosures [advice available here]. These amendments complete the reductions in disclosure requirements for new or amended IFRS Accounting Standards issued between February 2021 and May 2024. EFRAG hereby recommends their endorsement in the EU, which enables the European Commission to work on the endorsement of the full package of reduced disclosure requirements.
17 December 2025 [EU] – ESMA publishes study on the impact of its Guidelines on fund names
The European Securities and Markets Authority (ESMA) published research assessing the impact of its Guidelines on the use of ESG or sustainability related terms in fund names [full paper available here].
The study found that ESMA’s Guidelines have (i) improved consistency in the use of ESG terms by increasing alignment of fund names and their actual investment strategies and (ii) enhanced investor protection by reducing greenwashing risks.
ESMA notes that 64% of the funds mentioned in shareholder notifications changed their name, often to avoid the use of ESG related terminology, and that 56% updated their investment policies to strengthen their sustainability focus. In addition, the paper highlights that funds with higher fossil fuel exposures were more likely to remove ESG terms from their names, pursuant to the fossil-fuel related exclusions. On the other hand, funds whose names contain ESG terms have reduced their portfolio share of fossil fuel holdings more than all the other funds studied.
Germany
10 December 2025 [Germany] – Federal Government announces modifications to the national greenhouse reduction quota
The German Federal Government announced it would be modifying and bringing about further developments to the national greenhouse gas reduction quota.
The reduction quota and the embodying legislation specifies the level at which fuel suppliers must reduce their CO2-emissions and, thus, constitutes one of the central legislative instrument for achieving climate neutrality by 2045 in Germany.
The recent modification stipulates, on the one hand, a gradual increase in the reduction quota to 59% in 2040. On the other hand and for the first time, mineral oil companies will be required to use hydrogen which is produced using renewable energies [see further here, German only].
18 December 2025 [Germany] – Federal Government publishes Federal Report on Energy Research
The German Federal Government published its Federal Report on Energy Research, which provides an overview of funding in the field of energy research and the future strategic approaches at stake.
In 2024, the Federal Government invested €1.4 billion in energy research and funded 6,763 research projects. The focus of the funding to date has been on developing an efficient and resilient energy system, heating and cooling supply, electricity from renewable energy sources, expanding the infrastructure for hydrogen and the utilization of fusion energy.
The Federal Government intends to maintain these priorities in future fundings. It believes that energy research is essential for achieving climate neutrality successfully and provides an opportunity to strengthen the competitiveness of the German economy. However, in order to enable more coherent and long-term funding that accelerates the transfer of research results into practice, the Federal Government will reorganize and modify the funding structures [see further here, German only].
Italy
18 December 2025 [Italy] – Sustainability insights from the Italian Corporate Governance Committee’s 2025 annual report and recommendations for 2026
On 18 December 2025, the Italian Corporate Governance Committee approved the 13th annual report on the application of the Corporate Governance Code by Italian listed companies [available here, in Italian] and its recommendations for 2026 [available here, in Italian].
The report includes specific findings on the integration of sustainability objectives into the governance practices of Italian listed companies. In particular:
- It confirms a widespread commitment by companies to comply with the sustainability related provisions of the Code, notably the focus on the company’s sustainable long-term success and the strengthening of dialogue with shareholders and other relevant stakeholders;
- It notes a gradual improvement in the linking of variable components of remuneration to sustainability objectives. Specifically – compared to the findings for 2024 in relation to which a specific recommendation was issued – the number of variable components linked to sustainability objectives defined only in generic terms has progressively decreased (22% in 2025 compared to 31% in 2024).
Furthermore, the Committee issued a specific recommendation to strengthen stakeholder dialogue, which has become increasingly important following the implementation of Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive – CSRD) and the first publication of sustainability reports. To this end, the Committee recommends that during 2026 large companies adopt a policy governing the dialogue with stakeholders (other than shareholders) aimed at ensuring proactive management of stakeholder engagement.
22 December 2025 [Italy] – Sustainable Finance Roundtable publishes interoperability table mapping the SME-Banks Dialogue Document on Sustainability against the European VSME
The Sustainable Finance Roundtable – comprising the Italian Ministry of Economy and Finance, the Italian Ministry of the Environment and Energy Security, the Italian Ministry of Enterprise and Made in Italy, the Bank of Italy, the Italian Financial Market Authority (Consob), the Italian Insurance Supervisory Authority (IVASS), and the Italian Pension Funds Supervisory Authority (COVIP) – published an interoperability table [available here, in Italian] mapping the indicators in the Italian SME-Banks Dialogue Document on Sustainability [available here, in Italian] against the European Voluntary Standard for Micro, Small and Medium-sized Enterprises (VSME) developed by the European Financial Reporting Advisory Group (EFRAG).
The table identifies which ESG information requested by banks from SMEs can be directly sourced from VSME reporting, whilst highlighting information that remains specific to the Italian national context or to the prudential needs of the financial sector, such as climate risks, property guarantees, and social and governance aspects relevant to ESG risk management.
The document aims to promote a common language between SMEs and financial intermediaries, reducing duplicative and heterogeneous information requests whilst maintaining necessary flexibility and ensuring full compliance with both national and EU regulatory frameworks.