Local backlash against the EU’s disclosure regulation has not gone unnoticed in the U.S.
As President-elect Donald Trump prepares to expand his party’s efforts to beat back initiatives aimed at making corporate America account for its environmental impacts, Republican officials and business lobbyists are looking to step up their attacks on Europe’s climate agenda.
Trump’s governing trifecta — which sees Republicans take control of the White House and both chambers of Congress — has emboldened lawmakers and executives to turn up the volume on their complaints that EU green laws threaten competitiveness and impose undue costs. And they’re feeling encouraged by the fact that their criticisms are increasingly being echoed on the other side of the Atlantic.
The tension isn’t new, and the Biden administration has pushed back against the EU’s far-reaching laws. But the dawn of Republican dominance in Washington is adding fuel to the backlash as Trump vows to dismantle climate progress and reshape relations with allies and rivals alike.
“Donald Trump is America first. And if there is any example of a foreign regulation that puts America last, it’s the EU’s [climate agenda],” said Rep. Andy Barr (R-Ky.), a House Financial Services Committee member who met with European officials late last year to discuss Brussels’ “regulation factory.” “An America first agenda will animate ferocious opposition to a European Union that attempts to impose their costly, burdensome regulations on American firms,” he added.
The EU has introduced rules requiring companies to report on their environmental footprint and exposure to climate risk, known as the CSRD. The bloc also adopted a due diligence law mandating companies to identify and address both environmental and social harms in their supply chains — a measure stoking a wave of anxiety within corporate America.
Both of those laws require compliance by large companies that do business in Europe and while neither is welcomed by U.S.-based businesses, the due diligence law has raised more alarm because of its novelty, global reach and legal implications.
The EU also has a classification system of economic activities considered sustainable. Known as the EU taxonomy, it requires banks and investors to disclose to what extent their investments are aligned with what the bloc considers to be green.
Taken together, the programs are designed to crack down on corporate pollution by handing regulators, investors and consumers critical data to promote peer-to-peer competition among businesses to green their operations.
But rightward shifts in the European Parliament and national governments of member countries have brought rising skepticism over the impact of environmental regulations on the business sector.
Window of opportunity
The European Commission announced in November that it would reopen the laws to simplify them, as the region seeks to resuscitate its economy and boost competitiveness. While it’s not yet clear whether the effort will simply be a streamlining of the laws or a broader rollback like the push to weaken anti-deforestation rules, U.S.-based officials and companies see it as an opportunity to lobby Brussels with an eye to ensuring the changes are beneficial to them.
Cleo Rank, program manager for sustainable finance policy engagement at lobbying tracker InfluenceMap, said companies including JPMorgan, Bank of America and BlackRock have “sought to weaken ambition across the EU sustainable finance framework since its inception.”
The U.S. Chamber of Commerce is leading the charge, warning Congress last month that “the EU is imposing undue regulatory measures that have a direct impact on the competitiveness of American firms” with its due diligence program and asking U.S. policymakers to “engage directly with counterparts in Brussels.”
“There’s a window of opportunity here to get to rational policy developments in Brussels,” Tom Quaadman, executive vice president of the Chamber’s Center for Capital Markets Competitiveness, said in an interview.
Trump’s victory all but killed a U.S. Securities and Exchange Commission disclosure rule that the Chamber sued to stop, and California has announced a one-year delay for enforcement of its reporting program that the business group is also fighting in court.
On the flip side, Europe still has its climate-minded constituencies to placate after bitter legislative fights to enact the laws in the first place.
“We are really concerned about a bigger revamp,” said Manon Dufour, executive director of global climate think tank E3G’s Brussels bureau.
Lawmakers on the left of the European Parliament — which would have to vote on any changes — have been pressuring the Commission not to touch the content of the laws. “Reopening these legal texts questions institutional stability and legal certainty, public confidence in European legislation, and risks hampering the competitiveness of the EU economy, the very objective the Omnibus legislation proclaims to pursue,” the group told European Commission President Ursula von der Leyen in a letter dated Jan. 13, obtained by POLITICO.
For now, the Europeans are not as susceptible to U.S. pressure as Republicans would like.
Barr said EU officials aren’t “actually getting the message” that the green requirements will result in “capital flight” from Europe and make the bloc less competitive.
But competitiveness cuts both ways, said Emily Pierce, who previously worked in the SEC’s Office of International Affairs and is currently a policy officer at carbon accounting firm Persefoni.
While Europe’s introspection about its regulations opens a window for the next administration to advocate for reducing the requirements, dropping all requirements for foreign companies isn’t necessarily in its best interest either, she said.
“Europe applies these rules to non-EU companies to level the playing field,” Pierce said. “The current pressure is about European competitiveness, and dropping the extraterritorial application would not advance that agenda. It would actually harm it. Fragmented reporting doesn’t help anyone, and this is an opportunity to find more pragmatic cross-border approaches that ultimately will help all multinationals manage global demands more efficiently. »