Legislation News December 2025

Emissions Trading System for transport and heating fuels (ETS2) postponed

In November, the climate ministers of the EU member states agreed on a climate target for 2040. After negotiating late into the night, a compromise was voted in a public vote to cut the emissions by 90% by 2040 compared to 1990 levels. Slovakia, Poland, and Hungary voted against; Bulgaria and Belgium abstained, while Latvia and Austria expressed their reservations about specific aspects of the deal.

This deal amongst the 27 member states clears the way to finalise the 2040 targets after talks with the European Parliament.

The compromise includes several concessions which ease earlier proposed targets:

• The 2035 emissions reduction target is confirmed in the range of 66,25 - 72,5% compared with 1990.
• 5% of the 2040 emissions reduction target may be met through international carbon credits. Countries can reach their own target by investments abroad, starting from a 5-year pilot phase in 2031. This would lower the domestic target to 85%.
• The launch of the ETS2, the emission trading system for transport, heating, and additional sectors, will be postponed by 1 year, due to begin on 1 January 2028.
• The target will be reviewed every two years, starting from 2030, to align the targets with geopolitical developments as well as the availability of low-carbon technologies, with the evolution of energy prices taken into account. This will be complemented by an emergency brake which will allow EU countries to revise the 2040 targets downwards by 3% in case CO2 removals from land use and forestry do not materialise as hoped.

In December also the European Parliament approved the decision.

Weakening of Corporate Sustainability Reporting Directive (CSRD) approved by European Parliament

In February, the European Commission proposed the “Omnibus I” package that amongst others, significantly weakens the Corporate Sustainability Reporting Directive (CSRD). This month, the European Parliament approved the text after heavy discussions in the trilogue and a proposal to weaken the directive even further.

The “Omnibus I” package included raising the thresholds triggering obligations—from the original 250 employees to at least 1,000 employees and €450 million in annual turnover for EU companies—thus excluding around 80–90 % of firms previously within scope. The agreement also allows companies with fewer than 1,000 employees to opt out of reporting additional voluntary information, and includes transition exemptions for early wave reporters. Critics, including the ECB, warn that this scaling-back will reduce data transparency and impair the EU’s ability to assess and manage climate-related financial risks.

No more GSC or WKC with negative electricity prices

The Flemish Government has given its initial approval to a draft decree that updates the Energy Decree of 19 November 2010. The proposed changes aim to bring the allocation of green energy and combined heat and power (CHP) certificates in line with European state aid guidelines for climate, energy, and the environment (CEEAG).

One of the key adjustments concerns the conditions under which certificates are granted. In the future, no certificates will be issued for production or cogeneration savings during periods of negative electricity prices lasting at least 15 minutes, down from the current threshold of six consecutive hours. This measure applies to all installations, regardless of their commissioning date or banding factor.

The exemption for small-scale installations will also be revised to comply with CEEAG standards. Under the new rules, installations with a gross nominal capacity below 400 kW will remain exempt, while for units commissioned from 1 January 2026, the threshold drops to 200 kW.

According to the Flemish Government, these changes are intended to curb overproduction during peak periods, a growing concern as negative electricity prices become more frequent. The reform is expected to promote more efficient use of generation capacity and improve the balance between supply and demand in the electricity market.

The draft decree will now be submitted to the Council of State for its opinion before moving forward in the legislative process.