Climate policy this week centred on a historic US regulatory reversal, intensifying pressure on European carbon markets, and new public funding for industrial decarbonisation. Governments adjusted climate rules while investors assessed mounting policy risk. Europe debated emissions trading changes, and new signals emerged on biodiversity as a systemic financial concern.
US administration revokes scientific basis of federal climate regulation
The US Environmental Protection Agency on 12 February finalised the repeal of the 2009 endangerment finding, removing the legal foundation for federal regulation of greenhouse gas emissions. The decision also eliminated all vehicle emissions standards linked to climate policy. President Trump called it the largest deregulatory action in American history, while EPA Administrator Lee Zeldin described the finding as the “Holy Grail of federal regulatory overreach.”
The endangerment finding, established under President Obama, classified six greenhouse gases as threats to public health under the Clean Air Act. Its repeal strips the federal government of the primary legal tool it has used for 17 years to regulate emissions from vehicles, power plants and industrial facilities.
Legal challenges are expected immediately, with California Governor Gavin Newsom pledging to sue. The Washington Post reported that environmental groups called the move the single largest attack on federal climate authority in US history.
Investors warn US climate rollback increases business risk
Asset managers and shareholder advocates said the regulatory reversal creates significant uncertainty for companies that have already committed billions to emissions reduction. Reuters reported that investors warned of “stranded asset risk” if policy direction shifts again under a future administration.
Marcela Pinilla, director of sustainable investing at Zevin Asset Management, said the rollback interrupts the trajectory toward a low-carbon economy at precisely the moment companies have committed substantial capital. Despite the regulatory shift, investors said climate risk management remains a core priority. Multinational firms still face strict disclosure and emissions rules in the European Union and other markets.
EU considers major overhaul of free carbon permits
The European Commission is weighing three options to reform free emissions permits under the Emissions Trading System, according to an internal document. One option would scrap free allocations entirely. Another would make them conditional on low-carbon investment commitments. A third would broadly maintain the current approach. The Carbon Herald reported that the review reflects mounting industry pressure over competitiveness and energy costs. The Commission plans to propose its formal ETS revision in the third quarter of 2026, aligning the carbon market with a tougher 2040 target to cut domestic emissions by 85%. Further background on the ETS framework is available from the European Commission.
EU leaders defend carbon market amid political criticism
European Commission President Ursula von der Leyen defended the EU carbon market after several government leaders called for reform. She told reporters the system supports clean technology investment and includes safeguards to limit price volatility through the Market Stability Reserve. The ESG Today reported that von der Leyen criticised member states for reinvesting less than 5% of ETS revenues into industrial decarbonisation at the national level, compared with 100% reinvestment at EU level. German Chancellor Friedrich Merz also defended the system, calling it an effective instrument that allows growth without additional emissions. Bloomberg had reported that Merz initially suggested the EU should be open to revising or postponing ETS rules.
EU carbon prices slide on reform speculation
Benchmark EU carbon allowances fell as much as 8% on 12 February, their steepest drop since May 2022. Bloomberg reported that prices fell to €72.18 per tonne after political leaders suggested intervention in emissions trading. The price fall illustrates how policy signals shape carbon finance markets. Traders cited uncertainty around potential reforms as the main driver, while analysts warned that ongoing instability could weigh on investment in emissions-intensive sectors. Further analysis of the broader political divisions is available from Bloomberg’s coverage of the EU leaders’ summit.
EU introduces low-carbon procurement rules favouring regional industry
The European Union will add low-carbon and EU-made requirements to public procurement under a forthcoming Industrial Accelerator Act. Commission President von der Leyen announced the policy at an industry summit in Antwerp on 11 February. EU Today reported that public buyers will be required to favour clean technologies manufactured within Europe, targeting sectors including batteries, solar and wind components, and electric vehicles. The Bruegel think tank cautioned that mandatory local-content rules could conflict with international trade commitments and urged a “Made with Europe” approach that includes trusted partners.
France commits €1.6bn to industrial decarbonisation projects
France announced €1.6 billion in public funding for decarbonisation at seven major industrial sites. The Carbon Herald reported that the projects span cement, aluminium and chemical production, with four of the seven including carbon capture components. The investment covers fifteen years and is expected to cut emissions by an estimated 3.8 million tonnes of CO2 annually, roughly a quarter of the industrial reductions France aims to deliver by 2030. Beneficiaries include facilities operated by Holcim, Heidelberg Materials France, Ineos Naphtachimie, Vicat, Aluminium Dunkerque and Syensqo. The IEA provides wider context on France’s industrial decarbonisation investment programme.
Global shipping maintains green investment despite carbon pricing delays
Major shipping companies are continuing emissions-reduction investment even after the International Maritime Organization postponed a decision on a global carbon levy. Reuters reported that dual-fuel vessel orders rose 28% year on year, with cleaner ships now accounting for 74% of the container ship and vehicle carrier order book. The IMO delayed its vote on the Net-Zero Framework in October 2025 after opposition led by Saudi Arabia and the United States. A rescheduled vote is expected in October 2026, with the earliest possible implementation in 2028. Despite the delay, companies including CMB.Tech and Mitsui O.S.K. Lines confirmed that their long-term decarbonisation strategies remain intact. King & Spalding provides a detailed legal analysis of the IMO delay.
Banks face rising costs from fragmented climate policy
Barclays warned that diverging climate policies across major economies could make transition finance more costly. Bloomberg reported that Barclays described a “complex and fragmented policy environment” in its annual report, characterised by increasingly divergent approaches among governments. The bank said lenders may face trade-offs between growth and financed emissions targets as regulatory environments diverge. The report highlighted the deep divide between major economies on energy transition policy and its growing cost implications for financial institutions.
Biodiversity risk report raises pressure on corporate climate finance
A landmark Business and Biodiversity Assessment endorsed by more than 150 governments warned that nature loss now threatens economic stability. The IPBES report, published on 9 February following three years of research, found that global financial flows harming biodiversity reached $7.3 trillion in 2023, compared with just $220 billion directed towards conservation. Fewer than 1% of publicly reporting companies disclose biodiversity impacts. The European Commission said the findings support a shift towards nature-positive investment and confirmed it is developing a roadmap for nature credits. The IUCN described the assessment as a warning that nature loss poses systemic risk to financial markets.
