Dispatch from the European Union | May '26
*** Our weekly Dispatches provide an overview of the most relevant recent and upcoming developments for the shift to climate neutrality in selected European countries, from policy and diplomacy to society and industry. For a bird's-eye view of the country's climate-friendly transition, read the respective 'Guide to'. ***
Stories to watch in the weeks ahead
- Energy market intervention debates – Member states are likely to revisit proposals for deeper market reforms, potentially including more coordinated purchasing of oil and gas or renewed discussions on price controls if volatility persists. Despite the EU Council’s rejection of the idea to suspend the European Emissions Trading System (EU ETS), pressure for urgent reform is not going to go away. The Commission will come out with its proposal on 15 July, which could involve giving away billions of euros worth of additional emissions permits to industry. Whether or not to do this has caused significant divisions among EU countries.
- Carbon market and CBAM implementation – Further details are expected in the coming weeks about the implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM). It is intended to protect domestic industry as free ETS allowances are phased out. While facing external opposition, the measure stands as a major tool to align international trade with climate goals while protecting EU industry from unfair competition. However, many questions remain unanswered. Further detail is still needed on carbon pricing instruments, including certificate pricing and compliance rules, as the EU moves closer to a full rollout. Last month the Commission published the first quarterly price for CBAM certificates.
- IAA in trouble – The European Commission’s Industrial Accelerator Act, meant to work with the Clean Industrial Deal to boost European industry, has elicited pushback among both MEPs in the European Parliament and national governments. Peter Leibinger, head of the Federation of German Industries (BDI), has called it a “bureaucratic monster”. In particular, the proposal to prioritise “made in EU” products and plans to curb Chinese investment has not gone over well. The debate is set to continue, particularly for the proposal’s energy implications, in the coming months.
- NZF delayed but alive – The prospect of a Net-Zero Framework (NZF) for global shipping will live to see another day after a failed effort by the US to kill the pact at an International Maritime Organization (IMO) meeting on 1 May. The discussions have instead been postponed until the autumn. “While the US and its allies successfully pushed for a tactical delay of the discussion until autumn, the EU and other ambitious countries refused to abandon the NZF,” concluded sustainable shipping expert Felix Klann who followed the talks for environmental transport NGO T&E. “The EU must now hold its nerve and refuse to settle for a deal hollowed out by US pressure.”
The latest in EU policymaking – last month in recap
- Meloni rebuffed – The impulse from capitals like Rome, Berlin and Warsaw has been to criticise EU climate policy amid the current energy crisis as an extra burden on citizens and companies. Italy’s prime minister Giorgia Meloni came to the European Council summit in March demanding that the EU Emissions Trading System be suspendedto help emission-intensive industry. She had the backing of Eastern EU leaders, but the idea was shot down by Western leaders.
- Commission help – In late April, the European Commission unveiled a temporary framework to deal with the fallout of the energy crisis. It allows member states to subsidise up to 70 percent of additional fuel and electricity costs for industries such as agriculture, fisheries, transport, steel, and chemicals. The move sits alongside a broader “energy cushion” package that includes tax relief on electricity and coordinated gas storage efforts; these measures are a toolbox of possible actions that national governments can choose to take. Just like in the previous energy crisis, critics have argued these new subsidies risk prolonging fossil fuel dependence, particularly as they exclude structural measures like windfall taxes or price caps. Reportedly, the Commission is also considering allowing companies to break methane emissions rules in order to help them through the crisis. A report last week from the Financial Times found that the methane leaks those rules are designed to prevent waste twice as much gas each year as is currently stuck in the Strait of Hormuz.
- Some climate action persists – At the same time, the Commission has been trying to keep the long-term energy transition on track. A new 600-million-euro call for cross-border energy infrastructure projects, focused on grids and system integration, signalled the continued prioritisation of renewables and their market integration. The tension is clear: the Commission is attempting to stabilise economies amid volatile fossil fuel markets while accelerating the shift away from those same fuels. The risk is that repeated short-term interventions dilute price signals meant to drive decarbonisation investment.
- Commission publishes EUDR simplification review – The European Commission published its long-awaited ‘simplification review’ of the EU Deforestation Regulation, a law intended to guarantee that products in the EU do not contribute to deforestation worldwide, on 4 May. It was supposed to take effect last year but was delayed. The review, which was welcomed by NGOs, reconfirmed the validity of most of the law and dubbed it fit for purpose despite criticism from the US government. However, the review did slightly water down the legislation by suggesting to exempt leather, even though soluble coffee would be added.
- Grids package pushback – EU energy ministers had a contentious discussion on the European Commission’s Grids Package proposal, which aims to strengthen cross-border electricity infrastructure, accelerate permitting procedures and improve the resilience of the EU energy system. Sweden’s energy minister Ebba Busch strongly objected to the proposal’s provisions on congestion revenue and grid planning, insisting on member state’s flexibility in using the revenues. She threatened to freeze new power connections with EU neighbours unless the rules were changed. Other member states agreed that early adopters should not be penalised for their success.
- AccelerateEU – The European Commission unveiled the AccelerateEU package, which aims to reduce dependence on fossil fuel imports while cushioning price shocks caused by the Iran war. It is a toolbox of possible consumer protection measures, including subsidies, tax reductions, and energy vouchers. Similarly, the package includes industrial support such as targeted aid for energy-intensive sectors and a push for electrification with grid investment. Though there are many climate measures contained within it, the package has been framed as economic security policy. Temporary subsidies envisioned in the plan include up to 50,000 euros per company for farmers, fishers, and hauliers, as well as coverage of up to 70 percent of energy cost increases for some sectors.
Dave’s picks: highlights from upcoming events
- Full EU agenda – I’ll have my eye on energy ministers who will have an informal meeting in Cyprus on 12 May, where they will come back to discussions on the grids package. On 27 May, the European Commission will come out with its Tech Sovereignty Package, which will include a Strategic Roadmap for Digitalisation and AI in Energy. It will be interesting to see how the Commission deals with the issue of data centre energy use, which is causing an increasing strain on European grids. Upcoming energy conferences in Brussels that I’ll be at include the European Sustainable Energy Week 9-11 June, and the Driving Urban Transitions summit on 10 June.
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