Europe Eases, America Retreats: Navigating Climate Policy Uncertainty In 2025

Europe Eases, America Retreats: Navigating Climate Policy Uncertainty In 2025

Since the start of 2025, political shifts across the Atlantic have triggered significant changes in climate policy. In the EU, lawmakers are working to streamline sustainability frameworks through the Omnibus proposal. Meanwhile, the US is witnessing a near-total federal rollback of climate policy, with sweeping executive actions and regulatory retreats. These moves create growing uncertainty for the private sector, forcing firms to navigate evolving regulatory demands, respond to stakeholder expectations and strategize their next investments.

The EU’s Omnibus climate reforms – streamlining or softening?
In Europe, the response has centred on recalibrating the region’s ambitious climate agenda. In February 2025 the European Commission introduced the EU Omnibus Simplification Package, to preserve market competitiveness while maintaining climate goals (see Verdantix Strategic Focus: Unpacking The EU Omnibus And Its Impact On Sustainability Software). The proposal revises key sustainability policies, such as the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy and the Carbon Border Adjustment Mechanism (CBAM). While the package awaits formal approval, the changes could reshape corporate sustainability obligations, reducing the number of firms in scope by up to 80%, easing reporting demands and delaying compliance timelines by at least a year, depending on reporting tier.

Critics argue that the Omnibus is a step back from climate leadership for the EU – but it does not absolve firms of all responsibility. Businesses must still adopt climate transition plans, with “best efforts” to align with the 1.5°C Paris Agreement target, and double materiality remains a core requirement, obliging firms to assess both their environmental impact and the financial risks of climate change.

The timing is critical. Europe is the fastest-warming continent, and delays could make the energy transition more costly and disruptive. Critics warn that weakening reporting standards could undermine transparency, fragment regulations and erode investor confidence. Supporters, however, argue that easing compliance, particularly for small and medium-sized enterprises (SMEs), will free up resources for businesses to better integrate sustainability into their risk management and innovation strategies. 

Across the Atlantic, meanwhile, climate governance is heading firmly in the opposite direction.

US federal retrenchment: deregulation, disruption and data loss
Since taking office in January 2025, President Trump has moved swiftly to dismantle much of the climate policy infrastructure established under President Biden. On his first day, he withdrew the US from the Paris Agreement, declared a National Energy Emergency, and pledged to ramp up domestic fossil fuel production. He has also frozen all Inflation Reduction Act (IRA) funds and offshore wind permits, expanded timber harvesting on federal lands, and cut staffing at agencies responsible for climate research and implementation (see Verdantix Strategic Focus: ESG & Sustainability In The US). 

Federal agencies, such as the Environmental Protection Agency (EPA), the Department of Energy (DOE), Department of Agriculture (USDA) and Department of the Interior (DOI), have aligned with the administration’s deregulatory, fossil-fuel-forward agenda. Within weeks, EPA administrator Lee Zeldin launched strategic permitting reforms and began reviewing the 2009 Endangerment Finding – the legal foundation for the agency’s authority to regulate GHG emissions. At the same time, the DOE expedited fossil fuel infrastructure permitting, while the DOI reviewed plans to expand energy production on federal lands. Simultaneously, key climate data disappeared from federal websites, and scientific assessments such as the National Climate Assessment were delayed or deprioritized, limiting public access to significant climate information.

While federal action has stalled, states have stepped in to shape climate policy. In October 2024 California passed SB 219, requiring firms with over $1 billion in revenue to disclose full Scope 1, 2 and 3 emissions, and those with over $500 million to report climate-related financial risks by 2026. States such as New York, New Jersey, Illinois and Colorado have introduced similar bills, although none have yet passed. In response, the Trump administration issued an executive order on April 8, 2025, ‘Protecting American Energy from State Overreach’, tasking the Attorney General to challenge state laws that conflict with federal energy priorities, and specifically targeting California, New York and Vermont.

This tension within the pursuit of energy dominance – with both renewable energy and fossil fuel production reaching record highs – underscores the instability and confusion faced by the US private sector. In 2024, the US announced a historic $1 trillion in clean energy and manufacturing investments. Subsequently, the Trump administration’s tactics have focused more on penalizing sectors such as wind and solar than on promoting overall energy dominance. The administration has sought to revive struggling industries such as coal, even as global CO₂ concentrations hit an all-time high.

Resilience, risk and the road ahead
Climate policy across the Atlantic is diverging sharply: the EU is moderating, but staying the course, while the US is undergoing an aggressive federal rollback. Some things are clear: policy instability breeds uncertainty, heightens risk and ultimately discourages private investment. Yet climate risk assessments, adaptations and disclosures are not leaving the arena – even as governments attempt to reform or retreat from climate action – but rather, becoming business imperatives. In this volatile environment, investors and firms must remain agile and forward-looking, to mitigate risk and seize opportunity, as transatlantic policy continues to evolve.