11.1 The European Green Deal & Environmental Policy

11.1 The European Green Deal & Environmental Policy

Treaty Anchors: Articles 191, 192, and 193 of the Treaty on the Functioning of the European Union (TFEU); Regulation (EU) 2021/1119 (European Climate Law); Regulation (EU) 2023/956 (CBAM Regulation); Directive 2003/87/EC as amended (EU ETS Directive).

Environmental policy within the European Union has evolved from an incidental accompaniment to internal market harmonization into one of the Union's most prominent strategic and constitutional domains. First given explicit treaty recognition in the Single European Act (1986) and substantially reinforced by the Maastricht and Lisbon Treaties, EU environmental competence is codified under Title XX of Part Three of the TFEU (Articles 191–193). Under the von der Leyen Commission, environmental and climate objectives were elevated into the European Green Deal—a transformative policy agenda that reframes decarbonisation, biodiversity restoration, and circular economy principles as Europe's overarching economic growth strategy.

---

Constitutional & Treaty Foundations: Articles 191–193 TFEU

Article 191(1) TFEU establishes the four core objectives of Union policy on the environment:

1. Preserving, protecting, and improving the quality of the environment;
2. Protecting human health;
3. Prudent and rational utilisation of natural resources;
4. Promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

The Four Core Environmental Principles (Article 191(2) TFEU)

EU environmental legislation must be based on four constitutional principles that bind both the Union institutions when legislating and the Member States when implementing EU environmental law:

1. The Precautionary Principle (principe de précaution): Authorizes public authorities to adopt protective regulatory measures where scientific uncertainty remains regarding the existence or extent of risks to human health or the environment, but where the potential harm is severe or irreversible. As established in EU case law (National Farmers' Union, Case C-157/96, on the BSE export ban; Pfizer Animal Health v Council, Case T-13/99, before the Court of First Instance), preventive measures do not require definitive scientific proof of causation; a plausible, scientifically grounded risk assessment suffices. However, risk management must remain proportionate and non-discriminatory.
2. The Principle of Preventive Action (action préventive): Mandates that environmental damage should be prevented in the first place rather than cleaned up or compensated ex-post. This principle underpins mandatory environmental impact assessments (Environmental Impact Assessment Directive 2011/92/EU) and strategic environmental assessments (Directive 2001/42/EC) required before development consents are granted.
3. Rectification of Pollution at Source (correction à la source): Requires that environmental damage and pollution be combated as close as possible to the point of origin. This prevents the geographic or systemic externalisation of pollution, dictating emissions limits at the factory stack or tailpipe (e.g., Industrial Emissions Directive 2010/75/EU, Euro vehicle emission standards) and establishing the waste hierarchy under Directive 2008/98/EC (prevention, reuse, recycling, recovery, disposal).
4. The Polluter Pays Principle (pollueur-payeur): Dictates that natural or legal persons responsible for causing environmental degradation must bear the financial cost of preventing, controlling, and remedying that harm (Standley, Case C-293/97). Codified operationally in the Environmental Liability Directive (2004/35/EC) and internalised through economic instruments like landfill taxes and emissions trading allowances.

Legislative Procedures and Decision-Making (Article 192 TFEU)

Under Article 192(1) TFEU, Union environmental legislation is enacted under the Ordinary Legislative Procedure (OLP), with the European Parliament and the Council deciding on an equal footing by Qualified Majority Voting (QMV), following consultation with the European Economic and Social Committee (EESC) and the Committee of the Regions (CoR).

However, Article 192(2) TFEU establishes an exhaustive list of sensitive exceptions where the Special Legislative Procedure applies, requiring unanimity in the Council after merely consulting the European Parliament, EESC, and CoR:

• Provisions primarily of a fiscal nature (e.g., EU-wide carbon or energy taxation);
• Measures affecting town and country planning;
• Quantitative management of water resources or measures affecting the availability of those resources;
• Land use, with the explicit exception of waste management;
• Measures significantly affecting a Member State's choice between different energy sources and the general structure of its energy supply.

Article 192(2) second subparagraph contains a dedicated passerelle clause, permitting the Council, acting unanimously on a proposal from the Commission and after consulting Parliament, to make the Ordinary Legislative Procedure applicable to these sensitive domains.

The Minimum Protection Clause (Article 193 TFEU)

In contrast to internal market legislation harmonised under Article 114 TFEU (which establishes uniform standards that Member States cannot easily exceed without Commission derogation), Article 193 TFEU explicitly provides that protective environmental measures adopted under Article 192 shall not prevent any Member State from maintaining or introducing more stringent protective measures. Such measures must be compatible with the Treaties (i.e., they cannot constitute arbitrary discrimination or a disguised restriction on intra-EU trade under Articles 34–36 TFEU) and must be officially notified to the European Commission.

---

The European Green Deal & The European Climate Law

Unveiled in December 2019, the European Green Deal set the strategic objective of transforming the European Union into a fair, prosperous society with a modern, resource-efficient, and competitive economy. In June 2021, the Union converted these political ambitions into legally binding statutory obligations by enacting the European Climate Law (Regulation (EU) 2021/1119).

Core Mandates of the European Climate Law

1. Union-Wide Climate Neutrality by 2050: The Climate Law legally commits all Union institutions and Member States to achieve net-zero greenhouse gas (GHG) emissions within the EU by 2050 at the latest, transitioning to net-negative emissions thereafter.
2. The 2040 Target (90% Net Reduction, added in 2026): An amendment to the Climate Law, adopted by Parliament in February 2026 and by the Council on 5 March 2026, sets a binding 2040 target of a 90% net reduction in greenhouse gas emissions compared with 1990. From 2036, up to 5 percentage points may come from high-quality international carbon credits, and progress will be reviewed every two years.
3. The 2030 Intermediate Target (At Least 55% Net Reduction): The regulation elevated the EU's binding 2030 target from a 40% reduction to a net domestic reduction of at least 55% in greenhouse gas emissions compared to 1990 levels. To safeguard genuine industrial decarbonisation, the law caps the contribution of net removals (from land use, land-use change, and forestry - LULUCF) to the 2030 target at 225 million tonnes of CO₂ equivalent.
4. Independent Scientific Oversight: The law established the European Scientific Advisory Board on Climate Change (ESABCC), composed of 15 senior independent scientific experts providing scientific advice and publishing assessments on EU climate trajectory consistency.
5. Trajectory Monitoring & Consistency: The European Commission is required to assess every five years whether national and Union measures are consistent with the climate neutrality objective and trajectory, issuing formal recommendations to Member States under the Governance of the Energy Union Regulation (EU) 2018/1999.

---

The 'Fit for 55' Legislative Architecture

To translate the binding 55% net reduction target into enforceable sector-specific legislation, the Commission presented the comprehensive 'Fit for 55' package in July 2021. This historic overhaul modernized existing energy and climate legislation and introduced innovative market-based and border mechanisms.

1. The Reformed EU Emissions Trading System (EU ETS)

Created in 2005 under Directive 2003/87/EC, the EU ETS is the cornerstone of EU climate policy, functioning on a cap-and-trade mechanism where an aggregate cap is placed on total greenhouse gas emissions from covered installations and decreases each year.

• Tightened Ambition: The 2023 revision raised the emissions reduction target for ETS sectors from 43% to 62% by 2030 compared to 2005 levels.
• Linear Reduction Factor (LRF): The annual reduction of the cap was accelerated to 4.3% per year (2024–2027) and 4.4% per year (2028–2030), accompanied by two one-off rebasing cap reductions.
• Maritime Transport Inclusion: Emissions from large commercial maritime vessels (cargo and passenger ships of 5,000 gross tonnage and above) were brought within the ETS on a phased trajectory: surrendering allowances for 40% of verified emissions in 2024, 70% in 2025, and 100% in 2026 onwards (covering 100% of intra-EU voyages and 50% of voyages between an EU and a non-EU port).
• Phase-Out of Free Allowances: Free allocation of allowances to industry (traditionally granted to mitigate carbon leakage) is being systematically phased out between 2026 and 2034, directly synchronized with the parallel phase-in of the Carbon Border Adjustment Mechanism (CBAM).
• ETS 2 (Buildings, Road Transport & Small Industry): Recognizing that emissions in transport and heating were failing to decline sufficiently, the co-legislators created a separate, dedicated emissions trading system (ETS 2) covering fuel combustion in buildings, road transport, and additional industrial sectors, originally due in 2027 but postponed by the 2026 Climate Law amendment to 1 January 2028. Auctioning of ETS 2 allowances still starts in 2027, and a further one-year delay remains possible if energy prices are exceptionally high. ETS 2 regulates upstream fuel distributors rather than end consumers, incorporates an automatic price stability mechanism (releasing 20 million additional allowances if the price exceeds €45 per tonne), and directly channels revenues into the Social Climate Fund.
• The Social Climate Fund (Regulation (EU) 2023/955): Mobilizes up to €86.7 billion between 2026 and 2032 to cushion the social impacts of ETS 2 carbon pricing on vulnerable households, transport users, and micro-enterprises through direct temporary income support and targeted structural investments in building insulation, heat pumps, and public transit.

2. The Carbon Border Adjustment Mechanism (CBAM - Regulation (EU) 2023/956)

The Carbon Border Adjustment Mechanism (CBAM) is a world-first trade-environment instrument designed to prevent carbon leakage—the scenario where European industrial producers relocate carbon-intensive production to third countries with less stringent climate standards, or where EU products are replaced by more carbon-intensive imports.

• Sectoral Scope: Applies strictly to carbon-intensive, trade-exposed basic materials: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen (with downstream precursors).
• Operational Mechanics: EU importers must register with national authorities, calculate the verified direct (and certain indirect) greenhouse gas emissions embedded in imported goods, and purchase and surrender CBAM certificates. Certificate prices follow EU ETS auction prices: quarterly averages for 2026 imports and weekly averages from 2027.
• Deduction for Foreign Carbon Pricing: Importers can claim a deduction if an explicit carbon price has already been effectively paid in the country of origin, ensuring non-discrimination under General Agreement on Tariffs and Trade (GATT) Article XX.
• Implementation Timeline:
  • Transitional Phase (1 October 2023 – 31 December 2025): Importers face quarterly reporting obligations of embedded emissions without any financial levy.
  • Definitive Phase (from 1 January 2026): Importers bringing in 50 tonnes or more of CBAM goods a year (the de minimis threshold does not apply to hydrogen and electricity) must be authorised CBAM declarants. Under the Simplification Regulation (EU) 2025/2083, certificates for 2026 imports go on sale on 1 February 2027 and must be surrendered by 30 September 2027. The CBAM charge rises gradually to 2034, in step with the phase-out of free ETS allowances.

3. Renewable Energy Directive (RED III - Directive (EU) 2023/2413)

RED III raised the legally binding target for the share of renewable energy in the Union's gross final energy consumption to at least 42.5% by 2030, with an indicative additional top-up ambition of 2.5% aiming to reach 45%.

• Overriding Public Interest: The directive establishes a legal presumption that the planning, construction, and operation of renewable energy plants and related grids represent an overriding public interest and serve public safety when balancing against nature conservation directives.
• Renewables Acceleration Areas (zones d'accélération): Member States must identify dedicated geographic areas with low environmental sensitivity where permit-granting procedures are compressed to a maximum of 12 months for onshore projects and 24 months for offshore projects.

4. Energy Efficiency Directive Recast (EED - Directive (EU) 2023/1791)

The recast EED formally codified the "Energy Efficiency First" principle into EU statutory law, establishing an EU-wide legally binding obligation to reduce final energy consumption by at least 11.7% by 2030 compared to 2020 baseline projections. Public sector bodies face an annual 1.9% reduction target and a mandatory 3% annual building renovation rate.

5. The Just Transition Mechanism (JTM)

To ensure regional solidarity, the Green Deal created the Just Transition Mechanism, targeting support at regions most impacted by the phase-out of coal, peat, oil shale, and heavy industry:

1. Pillar 1: Just Transition Fund (JTF - Regulation (EU) 2021/1056): Provides €19.2 billion (combining MFF Heading 3 and NextGenerationEU) in direct grants for economic diversification, worker retraining, and environmental remediation, unlocked only upon Commission approval of national Territorial Just Transition Plans (TJTPs).
2. Pillar 2: InvestEU Just Transition Scheme: Mobilizes private capital through EU budget guarantees for green infrastructure and SME financing in transition territories.
3. Pillar 3: EIB Public Sector Loan Facility: Combines €1.5 billion from the EU budget with €10 billion in European Investment Bank lending to support public sector investments in green heating, public transport, and renewable energy.