On 4 March 2026, the European Commission unveiled the Industrial Accelerator Act—its boldest attempt in a generation to rebuild European industry around clean technology. Fourteen days later, the Omnibus I Directive entered into force, gutting the sustainability rules meant to support it. Experts warn: Brussels raised the scaffolding for a green industrial future. But at the same time, demolished the foundations beneath it.
“It’s an edifice,” says Davide Panzeri, Head of Italy-EU Policy at ECCO, an Italian climate change think-tank. “It hangs because it has many pillars keeping it up. If you start chipping away at those base pillars, then you risk having something that comes down and no longer does what you want it to do.”
The pillar in question is Omnibus I, which significantly narrowed two cornerstone directives of the EU’s corporate and climate sustainability framework: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
A policy at odds with itself
Under the revised rules, CSRD reporting now applies only to companies with more than 1,000 employees and more than €450m in annual turnover—removing an estimated 85 to 90 per cent of previously in-scope companies from mandatory requirements. CSDDD due diligence now only applies to firms with more than 5,000 employees and more than €1.5bn in turnover, with application deferred until 2029.
“The Industry Accelerator Act is also creating some sort of administrative new burden. So in a sense, you could say that this is going against the Omnibus zeitgeist at the moment in the Commission,” says Joseph Dellatte, Head of Energy and Climate Studies and Resident Fellow at Institut Montaigne.
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“They are just two elements of a much bigger picture. The accelerator act and the creation of green markets—that’s a demand side measure. Whilst all the reporting requirements, if we’re talking about the first omnibus—that’s the supply side because it looks at compliance for companies,” says Mr Panzeri.
To understand how the two instruments are to fit together, it helps to think in terms of forces. Mr Panzeri describes the relationship as a push-pull dynamic. “Push factors are your obligations, your reporting, your transition plan, and the obligation to carry through with those plans. And on the pull side, you have factors like you create green markets, which help the business case for green products, overcoming the so called ‘green premium.'”
The push and the pull
In theory, the CSRD and CSDDD were the push, compelling companies to map, disclose, and ultimately reduce their environmental footprint. The IAA is the pull — creating the market conditions that make going green worth it. Strip the push, and the pull loses its logic.
The IAA’s carbon intensity verification depends not on CSRD but on two other instruments. The ETS provides emissions benchmarks for domestic producers; CBAM supplies verified data for imports. Both remain intact — for now. But the deregulation agenda has them in its sights too.
Ten member states have signed a letter calling the ETS an existential risk for industry. They are demanding an extension of free allowances and a slower phase-out. A full legislative review is due by July 2026. CBAM, meanwhile, entered its definitive phase in January 2026. It faces US pressure to withdraw it entirely, industrial lobbying that forced a Temporary Decarbonisation Fund as a partial concession, and a certificate sales timeline Brussels has already pushed back to 2027.
The reporting framework has suffered a cut. The two pillars left standing are already wobbling.
Pillars under pressure
Dellatte frames it in terms of sticks and carrots. The ETS, CBAM, and the broader regulatory architecture are sticks. The IAA should be a carrot. “In addition to a stick approach, you also have some sort of carrots that create a condition for some sectors to develop inside of the EU or with trusted partners.” But the carrots do not arrive until 2029, when the IAA’s lead market provisions for public procurement are to apply.
Omnibus I also eliminated the requirement for companies to adopt and implement climate transition plans under the CSDDD — removed entirely, even for the largest firms still in scope. What remains under CSRD is a requirement to disclose a transition plan if one exists. But that is a disclosure obligation, not a mandate to have or act on one.
The IAA is designed to reward companies on a decarbonisation trajectory — its procurement thresholds and trusted partnerships framework are built around that logic. The legal obligation to be on one has just been removed.
A 40-year shift
The IAA is not just a technical industrial instrument. For four decades, EU industrial policy has been primarily horizontal — regulating markets without directly intervening in specific sectors. What the Commission is now attempting is something closer to vertical industrial policy. It is picking technologies, shaping supply chains, and using public procurement as a lever for strategic priorities.
“The Omnibus is trying to reduce the thickness of the horizontal policy, to still keep it but to make it less thick,” says Dellatte. “Whereas the Industry Accelerator Act tries to implement a little bit of vertical regulation for some sectors. And that’s a shift from the last 40 years in the EU.”
It’s a revolution when it comes to using such a kind of instrument, but there are some massive loopholes in the instrument at the moment, and politics will have to fix that. — Joseph Dellatte, Head of Energy and Climate Studies, Institut Montaigne
The EU was born out of industrial policy in the 1950s and evolved from the 1980s into something closer to a market regulator. The IAA is, in some ways, a partial return to origins—but a tentative one. Mr Dellatte is pointed: “It’s a revolution when it comes to using such a kind of instrument, but there are some massive loopholes in the instrument at the moment, and politics will have to fix that.”
China in the room
Underneath both debates sits a structural reality that neither instrument alone can resolve. Europe’s clean technology sectors face a competitiveness gap. It is not simply a function of European policy choices. It is actively sustained by Chinese industrial strategy.
“You have a deficit of competitiveness that is artificially sustained by a Chinese domestic policy that, if you look at the current 15th five-year plan, is not going to be changed,” says Mr Dellatte. He points to two pillars of that advantage: a fiscal stimulus for industry running at up to four times European levels, and a renminbi undervalued by around 30 per cent against the euro. European manufacturers in sectors like aluminium and clean technology are competing on structurally unequal terms—and Beijing has no intention of levelling them.
The IAA addresses this in part through its trusted partners framework, conditioning market access and procurement eligibility on supply chain origin. But here too, the Omnibus creates friction. The value chain cap introduced under Omnibus I limits what large companies can demand from smaller suppliers in terms of sustainability data.
The IAA simultaneously requires greenhouse gas intensity to be assessed across the full production chain—including indirect emissions from purchased electricity, hydrogen, and heat. The two provisions pull in opposite directions. The IAA incentivises granular supply chain transparency. Omnibus limits the obligations that would generate it.
Simplification or deregulation?
The Commission’s position is that Omnibus I is about reducing bureaucratic burden, not abandoning climate ambition. But that distinction is increasingly contested.
Simplification is not deregulation. — Davide Panzeri, Head of Italy-EU Policy at ECCO
“Simplification is not deregulation,” says Mr Panzeri. “And I think that with the first steps that the Commission has taken with the omnibuses, we’ve gone a bit too far into the realm of deregulation—and that’s not good for business either, because you’re changing the level playing field.”
Companies that have already invested in compliance infrastructure now face a different problem: competitors who no longer have to meet the same standards. The deregulatory turn does not simply reduce costs. It reshuffles them, and not always in ways that reward early movers.
An unfinished architecture
What emerges is not quite a contradiction, but not a cohesive plan. The Commission is attempting a managed green transition that is economically survivable and geopolitically aware. The two are hard to square.
“What the Commission is trying to do with the Green Deal is to make the transition as economically feasible as possible,” says Mr Panzeri. “There are inevitably going to be economic pains. But the aim is to minimise those and give member states the tools to minimise those pains and take advantage of the economic opportunities the transition brings.”
“Both are really important elements of this really big picture,” says Mr Panzeri, “which has a number of moving elements in it.” For now, that picture remains unfinished — and the Commission is building it with fewer tools than it started with.
