On Tuesday, April 1st, Gifec and the consultancy firm Carbon Cutter, which specializes in ecological transition issues, provided an update on current European regulations related to decarbonization.
The “Fit for 55” Plan
In June 2021, the European Union unveiled its “Fit for 55” climate plan, aiming for a 55% reduction in greenhouse gas emissions by 2030 compared to 1990 levels. This legislative package includes an unprecedented set of measures to achieve carbon neutrality by 2050.
Among its key measures are the planned phase-out of diesel and petrol cars by 2035, the introduction of a carbon border tax for goods entering the EU, and a complete overhaul of the European carbon market.
This regulatory push has given rise to a host of acronyms (EU ETS, CBAM, CSRD, CS3D…), which were explored in greater detail during the April 1st conference listed on Gifec’s agenda, aimed at answering manufacturers’ questions on the subject.
The European Carbon Quotas Market (EU ETS)
The Emissions Trading System (EU ETS) was established in 2005. This polluter-pays mechanism sets a price for each tonne of CO₂ emitted by the most carbon-intensive sectors.
The revision of this system aims to expand its scope to include fuels used in road transport and heat production in buildings — energy consumption areas that were previously excluded. These sectors will enter a separate carbon market by 2027, while maritime transport will be integrated into the existing system.
In France, the 50 industrial sites with the highest CO₂-equivalent emissions (including ArcelorMittal, TotalEnergies, Engie…) account for 40% of the country’s industrial emissions. At the European level, the EU ETS targets around 11,000 of the most carbon-intensive sites. Obligated entities must cover their annual emissions through the purchase of emission allowances.
The price of these allowances varies according to market demand. At the time of the conference, Gifec and Carbon Cutter reported that the cost of one tonne of CO₂e stood at €71.30 — down from €84 two months earlier and €64 at the end of 2024.
To avoid penalizing industry, a significant share of allowances was previously granted for free. However, starting this year, these free quotas will be gradually reduced, reaching zero by 2035.
As a result, with rising carbon costs, reducing carbon emissions has become a way for companies to lower the cost of their products.
The Carbon Border Adjustment Mechanism (CBAM)
The Carbon Border Adjustment Mechanism (CBAM) plays a key role in this transition. Often described as the carbon emissions “checkpoint,” CBAM ensures that imported goods are subject to the same carbon costs as those produced within the EU.
If you are a European manufacturer, you must pay for carbon allowances for every tonne of CO₂ equivalent you emit.
If you are a non-European manufacturer, you pay the same carbon price as if the product had been made within the EU.
The products currently covered by CBAM include:
- Steel
- Aluminium
- Hydrogen
- Nitrogen fertilizers
- Electricity
- Cement
Importers of these products from outside the EU must register with customs and submit a declaration of their associated emissions.
The CBAM system is gaining importance as the number of free allowances under the EU ETS declines. It will be fully implemented by 2035, when no free quotas remain.
In this context, manufacturers are strongly encouraged to measure and reduce their carbon emissions promptly, or risk being excluded from the market.
The EU Regulation on Deforestation
Deforestation has existed for as long as humans have used wood for construction or energy production. However, since the Industrial Revolution, its pace has significantly accelerated.
State of Global Deforestation
Each year, an area equivalent to the size of Portugal is deforested. In reality, it is not the demand for timber but cattle farming — responsible for 65% of deforestation in South America — that has the greatest impact on global forests.
In tropical regions, it takes 700 years for a secondary forest to return to a primary forest. In Europe, this figure rises to 1,000 years. In other words, ancient forests cannot simply be replanted — yet forest ecosystems are essential to the balance of life and the proper functioning of our societies.
In France, 250 kg of CO₂e per capita are linked to deforestation — equivalent to driving around 2,000 km by car.
The EUDR: Stopping the EU’s Contribution via Global Trade
To end the EU’s contribution to global deforestation through international trade, the EU Deforestation Regulation (EUDR) targets specific agricultural commodities. These include cocoa, coffee, palm oil, soy, rubber, and beef, as well as derivative products such as leather, charcoal, and printed paper.
Are you a producer or importer of these goods, like Michelin, LVMH, or Ferrero? Then you are subject to the EUDR. To comply with this regulation, you must ensure that the products:
- Do not originate from land that was deforested or degraded after 2020
- Comply with the laws of the country of production
- Are subject to due diligence procedures
This due diligence process involves three steps, depending on the level of risk in the country of origin: gathering information, risk assessment, and implementation of mitigation measures to achieve a negligible or zero-risk level.
Very small enterprises (VSEs) and small and medium-sized enterprises (SMEs) are exempt from due diligence and from the reporting requirements for these products.
The European Green Deal: CSRD and CS3D
Climate change poses a threat to business health and represents a growing risk for investors and asset managers, as the environmental crisis could evolve into an economic crisis.
The Corporate Sustainability Reporting Directive (CSRD)
The CSRD aims to harmonize non-financial reporting across companies. Its purpose is to identify the most resilient and high-performing organizations by considering double materiality: both the company’s impact on the environment (impact materiality) and how environmental issues affect the company’s financial performance (financial materiality).
In February 2025, the European Commission announced new thresholds for CSRD applicability. The number of companies affected is expected to drop from around 50,000 to 10,000, targeting only those with more than 1,000 employees and annual revenues above €50 million. Reporting deadlines have been extended, and voluntary reporting has been introduced for companies with fewer than 1,000 employees.
However, the proposed revision of the directive still needs to be adopted by the European Parliament and the Council of the European Union.
The Corporate Sustainability Due Diligence Directive (CS3D or CSDDD)
In 2013, the collapse of the Rana Plaza building in Bangladesh — also known as the Dhaka factory disaster — led to the introduction of due diligence legislation in France to improve risk management. This obligation covers all environmental and human rights impacts throughout the entire value chain and applies to companies with more than 1,000 employees and revenues exceeding €450 million.
It requires the implementation of a vigilance plan that includes preventive measures, risk assessments, and a list of actions to address identified harm to the environment, human rights, health, and safety. The law also provides a legal framework for litigation. It has, for example, enabled legal action against Danone and eight other food industry companies to reduce plastic pollution.
Member states are responsible for determining penalties that are both “proportionate” and “dissuasive.”