250 years on, the European Commission still needs to read Adam Smith

By
Pieter Cleppe
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At the end of February, EU member states approved an agreement to significantly scale back sustainability reporting and due diligence requirements for companies, as part of the EU’s “Omnibus I” simplification package. “Simplification” is EU newspeak for “deregulation”. This watering down of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) is welcome, but it only represents a very modest first step.

German newspaper Die Welt looked at the European Commission’s track record on deregulation, noting that despite all the rhetoric, “under Ursula von der Leyen, there were even more new legislative acts in 2025 than in previous years.” It thereby quoted from an unpublished study from trade association Gesamtmetall and notes:

“In 2025, the institution (…) initiated 1,456 legislative acts – more than at any time since 2010. (…) According to the study, the Commission proposed 21 directives and 102 regulations, and it issued 137 delegated acts and 1,196 implementing acts – even though von der Leyen had announced an ‘unprecedented’ reduction in regulations for last year. Even during the CDU politician’s first term in office from 2019 to 2024, there were significantly more legal acts than under her two predecessors.”

Von der Leyen’s first term, between 2019 and 2024, was marked by the “green deal”, an avalanche of EU regulations being unleashed onto companies. That things even worsened in 2025 is telling. The EU Commission seems completely out of control.

“The current EU Commission is constantly promising to ease the burden on the economy,” Oliver Zander, CEO of Gesamtmetall is quoted complaining, as he adds that as Brussels is imposing four new legal acts on companies every day: “That is the opposite of reducing bureaucracy. (…) “Many companies are struggling to keep up with implementation.”

In response, the European Commission states that it is not the number of proposed legislative acts which counts, as this is unrelated to the savings achieved in administrative costs. According to the institution, “a significant proportion of the legislation adopted in President von der Leyen’s current term is explicitly aimed at reducing administrative burdens.”

Indeed, looking at the actual cost rather than the number of legislative acts makes sense. That is what my former think tank, Open Europe, did in the past, when it estimated that the cumulative cost of EU regulation introduced between 1998 and 2018 for all 27 EU member states amounted to a whopping €928 billion. The key finding was that the EU policy level was responsible for 66% of the €1.4 trillion cost of all national and EU regulation that was introduced during that period.

More recent estimates have not pointed at a change in the trend. In 2023, the German Regulatory Control Council concludedthat new EU regulations issued during the pandemic alone added an annual compliance burden of €550mn on companies.

That the approval of the first Omnibus package is only happening now, indicates how slow things go. Already in March 2023, the leaders of France, Germany, Belgium and the European Liberal Party (EPP) called for a “regulatory pause” on the Green Deal.

The export of EU regulations

Not only European companies are suffering from EU regulatory inflation. Over the years, the EU has come to insert ever more regulation into its trade policy, thereby angering non-European producers. This is in particular the case as a result of the EU’s new deforestation rules, which impose a whole range of new bureaucracy on Indonesian and Malaysian palm oil producers, despite the fact that great progress has been made in reducing deforestation over there. Malaysian deforestation has improved significantly, with NGOs acknowledging a reduction of 13% in 2024. Malaysia only lost 0.56% of its remaining primary forest in 2024, according to Global Forest Watch.

Pamela Coke-Hamilton, executive director of the ITC, a joint agency of the UN and World Trade Organization, has thereby warnedthat these EU regulations risk a ‘catastrophic’ impact on global trade, as smaller suppliers in particular risk to be “cut off” from trade flows. After pressure from both European industry and trading partners, the implementation of the regulation was postponed with one year.

This is quite indicative for the broader trend. So far, the EU’s simplification drive has really not amounted to much more than watering down or postponing regulations that have not yet come into force. A proper deregulation exercise, modelling the reforms in Argentina under President Javier Milei, is absolutely not happening.

On the contrary, while one arm of the EU machine is genuinely trying to stop overregulation, another arm is simply continuing with business as usual. That’s the case for climate policy, where a positive step – the watering down of the EU’s de facto ban on combustion engine vehicles by 2035 – was overshadowed by the EU approving yet another climate target – this time by 2040. Also, despite calls from both the chemical industry and important member states like Italy to do something about the massive burden for industry of the EU’s emission trading scheme (ETS) – a de facto climate tax – no action is being taken here. On the contrary, the expansion of the ETS to consumers from January 2027 on, remains on schedule. That means that families heating their homes with gas or driving a petrol or diesel car, face an extra annual cost of a few hundred euro.

Meanwhile, billions and billions of EU taxpayers money continue to be spent on investments in the infrastructure that will be needed for an energy system based on renewables, the preferred energy source of policy makers, who continue to overlook the many challenges plaguing wind and solar power.

Incapable of reform?

Even the European Commission’s new proposal to support European industry contains new climate policy. Politico has dubbed the so-called “Industrial Accelerator Act”, which was originally named the “Industrial Decarbonization Accelerator Act”, “a climate law in disguise.” The law proposes to require governments to spend their money for low-carbon materials and net-zero technologies produced in the EU. One example is how it wants a quarter of construction-related steel that governments purchase, to meet green criteria. Never mind that these kinds of “green steel” projects have been found to be unprofitable by industry, for example by steelmaker ArcelorMittal, which has suspended such an investment project in Dunkirk. Truly, going from “green steal” to “green steel” is not much of a step forward.  

The act’s “Made in Europe” proposal is furthermore not just problematic from the perspective of overregulation. A World Trade Organisation panel already found similar “Made in US” rules illegal. So much for the EU opposing the protectionist agenda of US President Donald Trump.

In a comment on the Industrial Accelerator Act, former Dutch diplomat Johannes Vervloed writes:

“Industrial policy is a French hobby, stemming from centralist thinking. This idea dates back to the time of Colbert, who served as Minister of Finance during the reign of Louis XIV, and his mercantilism, a protectionist system that aimed to keep competitors from other countries out. It has never worked, either in practice or in theory.

(…) Industrial policy is already a mess, but the European Commission is making it even worse. With the IAA, it wants to support and protect energy-intensive basic industries such as steel, chemicals, cement and paper, which are in dire straits or have even thrown in the towel, but on condition that they drastically reduce their CO2 emissions (‘decarbonise’). (…)

With this, the European Commission persists in the “green growth” fairy tale. Decarbonisation is an illusion. It is unrealistic to think that energy-intensive industries could simply switch to non-fossil fuels. Alternative energy is either unavailable or far too expensive. Hydrogen, which is supposed to replace gas, is exorbitantly expensive. For this reason, the hydrogen plant in Eemshaven has already had to close its doors. Nuclear energy is not available, except in France. Electricity offers no solution for heavy industry, and even if it can be used for certain production processes, it is only available in limited quantities. The grid in the Netherlands is already overloaded and companies are often unable to connect to it.”

This month marks the 250th anniversary of the publication of Adam Smith’s “The Wealth of Nations”. One of the key things the father of economics demands from policy makers is to show at least a little bit of modesty. He maintains that centrally planning, restricting and organising economic interactions is bound to lead to failures.

Clearly, it seems the European Commission may be in need to read his work.

 

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