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It is not the end of the Green Deal. But something in Brussels has clearly changed.
After years in which Europe’s climate objectives appeared almost immune to any serious discussion about the economic and social costs of the transition, the European Commission is beginning to reckon with a word that had remained on the margins of the debate for too long: competitiveness.
The clearest signal came on July 17, when the Commission presented a major review of the European Union’s Emissions Trading System, the mechanism that requires power producers, heavy industry, airlines and shipping companies to pay for their CO2 emissions.
The climate objective formally remains unchanged. The European Union is still pursuing a 90 per cent reduction in net greenhouse gas emissions by 2040 compared with 1990 levels, on the road towards climate neutrality by 2050. What is changing, however, is the route Brussels intends to follow.
Under the Commission’s proposal, the annual reduction in the number of carbon allowances available on the market would slow significantly. The rate would fall from the current 4.3 per cent to 3.7 per cent in 2031 and then to 1.7 per cent in 2036. Heavy industries such as steel and cement would also retain free CO2 permits for longer, with their phase-out extended until 2038.
These figures may appear highly technical. Politically, they tell a much larger story.
For years, the European approach was relatively straightforward: make carbon emissions progressively more expensive and companies would be forced to accelerate their transition towards cleaner technologies. The problem is that the rest of the world did not stand still while Europe was designing increasingly ambitious climate regulations.
European manufacturers are competing with companies in the United States that generally benefit from cheaper energy and with Chinese competitors backed by powerful industrial policies, enormous economies of scale and, in many cases, less demanding environmental constraints.
The consequence is becoming increasingly difficult to ignore. Climate ambition can only be economically sustainable if European companies remain capable of producing, investing and employing workers in Europe.
The Commission itself now openly acknowledges the problem. Presenting its new electrification strategy on July 17, Brussels explicitly referred to a “changing geopolitical and economic context” requiring the ETS to be modernised, placing competitiveness, decarbonisation and European independence within the same policy framework. The Commission also acknowledged basic structural problems: electricity can still cost around three times as much as gas, grid connections can take years and many clean technologies struggle to achieve commercial scale.
This is where climate policy ceases to be merely an environmental question and becomes a question of industrial and geopolitical power.
Closing a factory in Lombardy, Germany or Poland may reduce the emissions recorded within the European Union. But if Europe then imports the same steel, chemicals or industrial goods from countries operating under weaker environmental requirements, the global environmental benefit becomes far less obvious.
Europe risks exporting not only its emissions, but also its factories, its technological know-how, its investments and its jobs.
This is precisely the criticism that conservative forces and several national governments have made for years. What has changed is that these arguments are no longer confined to the political margins of Brussels. They are increasingly influencing the centre of European decision-making.
The European Conservatives and Reformists have been particularly vocal.
On the eve of the Commission’s announcement, Alexandr Vondra, the ECR coordinator in the European Parliament’s Committee on the Environment, called the ETS review a test of whether Brussels was finally prepared to recognise the “geopolitical and economic reality facing European industry”.
Vondra called for the phase-out of free allowances to be halted or significantly slowed for sectors where decarbonisation remains particularly difficult. His central argument was unequivocal: “Europe’s climate policy cannot come at the expense of its industrial competitiveness”.
The concern is not that Europe should abandon environmental objectives. It is that environmental policy should not produce an outcome in which emissions are merely transferred abroad while European industrial capacity disappears.
A few days earlier, former Polish Prime Minister and ECR MEP Beata Szydło had made the same connection between climate regulation and economic strength during the European Parliament debate on the priorities of the new Irish Presidency of the Council.
For Szydło, the forthcoming ETS review represented a crucial test of whether the European economy could finally “spread its wings and become competitive” rather than being constrained by rules developed by the EU itself.
Other members of the group went further. Italian ECR MEP Stefano Cavedagna described the ETS as a symbol of the regulatory excesses that have damaged European competitiveness, while Polish MEP Bogdan Rzońca reduced the debate to a deliberately blunt priority: energy, he argued, must first be affordable for entrepreneurs and then green.
There is also a broader energy question behind the carbon market.
The Commission wants Europe to dramatically increase the role of electricity in transport, heating and industry. Its new action plan aims to raise electricity’s share of final energy consumption from around 23 per cent today to 46 per cent by 2040. Brussels estimates that greater electrification could eventually reduce European fossil-fuel imports by €260 billion per year.
Yet here too the ECR argues that targets cannot replace infrastructure.
Daniel Obajtek, the group’s coordinator in the European Parliament’s Industry and Energy Committee, has warned that increasing electrification targets without sufficient generation capacity, storage and electricity grids would simply increase costs for businesses and households. He has called for incentives rather than compulsory targets and for national governments to retain control over their energy mixes.
Vondra has connected the same debate to another issue increasingly difficult for Brussels to avoid: nuclear energy. “There can be no credible electrification strategy without nuclear power,” he argued, calling for easier investment in new reactors and fewer European regulatory barriers to nuclear financing.
Taken together, these positions outline an alternative approach to the original philosophy of the Green Deal: decarbonisation remains an objective, but it must be reconciled with technological neutrality, affordable energy, national circumstances and the preservation of Europe’s industrial base.
And Brussels itself is now moving, at least partially, in that direction.
The proposed ETS reform does not simply slow down some of the system’s requirements. It also attempts to transform carbon pricing into a more explicit instrument of industrial policy. The Commission wants half of future ETS revenues to support domestic industry, while tens of billions of euros would be mobilised to finance cleaner technologies and industrial investment. Companies receiving certain benefits would in turn be required to make concrete investments in decarbonisation.
The philosophy is therefore changing.
Instead of relying almost exclusively on making carbon-intensive production more expensive, the EU is increasingly being forced to ask how clean production can actually become economically viable on European soil.
This distinction matters.
A climate policy based only on prohibitions, deadlines and higher costs can reduce European emissions on paper while simultaneously weakening the productive capacity necessary to finance and develop the transition itself. A climate policy integrated into a genuine industrial strategy has a better chance of achieving both objectives.
The shift is also significant because conservative criticism of the Green Deal is no longer simply an external attack on the European consensus. Elements of that criticism are gradually becoming part of the consensus itself.
Competitiveness, energy prices, strategic autonomy, technological neutrality and the risk of deindustrialisation have entered the vocabulary of Brussels. The European debate is no longer merely about how quickly emissions can be reduced, but about whether Europe will still possess a competitive industrial economy at the end of that process.
The battle is far from over.
The Commission’s ETS proposal will still have to be negotiated with the European Parliament and the member states, and several governments and political groups are likely to demand further changes. At the same time, environmental organisations and parts of the European left will argue that loosening the system risks undermining one of the EU’s most effective tools for reducing greenhouse gas emissions.
That criticism cannot simply be dismissed. The ETS has played a significant role in lowering emissions in the sectors it covers. The real question is therefore not whether carbon pricing works, but whether a system designed in a different economic era remains sustainable when Europe faces high energy costs, aggressive Chinese industrial competition, renewed American economic nationalism and growing concerns about its strategic dependence on foreign powers.
Europe has not abandoned the Green Deal.
What it is beginning to abandon is the assumption that environmental ambition can be separated from economic power.
For years, the European debate often treated competitiveness as something that would automatically follow the green transition. Today, Brussels is discovering the opposite: without competitive industry, affordable energy and technological capacity, there may be no durable green transition at all.
A strategy that produces European deindustrialisation, greater dependence on foreign technology and increased imports from more carbon-intensive economies would not merely be an economic failure. It would be an environmental contradiction.
And perhaps that is the most important change taking place in Brussels.
Europe’s industrial reality has finally earned a place alongside its climate ambitions.