Brussels proposes reducing environmental obligations required of companies

Amid the uncertainty caused by the steel and aluminium tariffs imposed by the United States or the sometimes unfair competition from cheap Chinese products, the European Union is ready to accelerate its conversion to become a more attractive block for industry. The new European Commission of Ursula von der Leyen wants to show that it has listened to the demands of the manufacturing sector, which is protesting against sky-high energy prices, too many taxes and a bureaucracy that it believes is stifling investors, and on Wednesday it launched a huge package of measures to correct the situation. Among other things, it wants to allocate 100 billion euros in investment to promote the decarbonisation of companies, proposes that Member States apply a minimum rate of 5% VAT to electricity or greatly reduce the administrative burden, in three major interconnected plans with the same objective: modernising the European economy.

To do so, and although the Community Executive assures that it is not giving up on any of its climate objectives, the European Commission is willing to backtrack on some steps taken in recent years. Because among the measures presented this Wednesday to ease the bureaucratic burden, Brussels proposes reducing the environmental obligations required of companies. For example, it wants that from now on only those with more than 1,000 employees will be obliged to report on their impact on the environment and human rights. A step backwards, since at present, the rules apply to companies with more than 250 employees. According to Community data, the change would free 40,000 companies from these obligations, that is, 80% of all the companies to which the policy was initially applied. Not only this, but the Community Executive also plans to soften the minimum fines for companies that do not reduce their carbon footprint. This is a change to the directive that required companies to identify and mitigate their impact on environmental or social sustainability, including human rights, as well as the impact of firms in their supply chain even when they are outside the EU. Now, Brussels is removing the threshold that required minimum sanctions for non-compliance to be at least 5% of the company's annual turnover. This, according to EU sources, had created "a lot of nervousness in the industry."

Facing the US and China Commissioner Dombrovskis warns that the alternative is to “give ground” with values ​​other than those of Europe

In total, these first measures against red tape – with further packages to follow in the coming months – will save companies up to 6.3 billion euros in administrative costs, according to the Commissioner for Economic Affairs, Valdis Dombrovskis, who justifies deregulation by the need to see the “bigger picture”. “This week we saw an old strategic partner (the US) vote against a UN resolution condemning Russia’s aggression against Ukraine. We must treat these events as a call to action. The freedoms we enjoy and cherish can no longer be taken for granted in this complex and more conflict-ridden world,” said the Latvian politician. “The alternative – to this reduction in administrative burden – would be to retreat and give ground to competitors who do not necessarily share our values ​​or working methods.”

The European Commission believes that the bicycle has to pedal, because if it stops, the US or China will throw it out. Along with the anti-bureaucratic package, the European Commission has presented the Clean Industrial Deal, which aims to support two key sectors: energy-intensive industries and the clean technology sector. The idea is to revitalise European manufacturing companies while reducing their carbon footprint, which, according to EU data, will mobilise 100 billion euros. At the same time, a new framework of national aid is being put on the table, more significant for clean industry, which will allow support for the manufacture of green technologies, such as batteries, or help polluting companies to reduce their emissions.

“The world is changing rapidly. And so must we. Our prosperity and security depend on it. Our vision is for Europe to lead as a power in clean manufacturing,” said EU Vice-President Teresa Ribera, Commissioner for Competition and Clean Transition, who is a key player in this EU effort.

It all follows the report on competitiveness that Ursula von der Leyen commissioned from Mario Draghi, which called for massive investments by Europe to play in the same league as China or the United States. But one of the biggest problems facing European industry is drastically higher energy costs than those of its competitors. Energy prices in Europe are double what they were before the pandemic or the war in Ukraine. Gas prices, in particular, are four or five times higher than in the United States. These are significant differences that have an impact on the European economy as a whole, but particularly on energy-intensive industry.

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It is urgent to correct the situation, especially because the shortcomings are structural. Europe still relies too much on imported fossil fuels, which makes it more vulnerable to global market uncertainty, foreign and geopolitical pressure and causes more price volatility. In addition, there is a lack of full integration into the electricity system. There is still a long way to go in terms of interconnections, network infrastructure, integration of energy systems and system flexibility to continue expanding the integration of cheaper and cleaner energy sources, the European Executive believes. The rising costs of the system, network tariffs and taxes and levies, drive up electricity costs even further and constitute a substantial part of the energy bill. For this reason, the European Commission is asking countries to lower energy taxes, including applying the minimum rate of 5% VAT on electricity.