The European Union (EU) is currently reversing course on environmental policy. Rising energy prices since the start of the war in Ukraine, the publication in late 2024 of Mario Draghi’s report on the economic lag of European companies, the dismantling of U.S. environmental legislation following Donald Trump’s return to the White House, and the renewed emphasis on European rearmament all appear to be converging to limit—if not bury—the EU’s ambitions for the ecological transition.
But what if this crisis is not so much the end of the EU’s environmental ambitions as an opportunity to develop a new legal framework for the ecological transition?
Until now, environmental law has largely developed in step with industrialization, requiring companies to mitigate the harmful impacts of their activities on the environment and on public health. Yet it has proved insufficient to meet the scale of today’s challenges, from climate change to biodiversity loss. This is due not only to shortcomings in effectiveness, but also to a limited level of ambition.
While public debate often focuses on environmental crime, most environmental harm in Europe stems from lawful economic activities. This points to a deeper paradox: environmental regulation remains relatively modest in its ambitions, yet it imposes significant costs on both businesses and taxpayers who ultimately fund the generous subsidies designed to support the “greening” of corporate practices.
If companies must be subsidized in this way to limit the harm they cause to ecosystems, it is because environmental considerations are not naturally prioritized by firms or markets—and existing legal frameworks do little to change this. On the one hand, as noted, traditional environmental regulation remains relatively unambitious. On the other, the formal obligation for companies to “take into account” the environmental impacts of their activities—such as that introduced into Article 1833 of the French Civil Code in 2019—lacks both enforcement mechanisms and meaningful incentives.
Indeed, financial performance is still largely measured without regard to the ecological footprint of economic activities. As a result, an organization’s environmental impact, in itself, has little to no bearing on its financial outcomes. Executive compensation in large corporations remains only marginally tied to sustainability criteria, and products serving equivalent functions are treated as comparable, despite vastly different environmental impacts.
In such context, it is hardly surprising that the “ecological constraints” imposed by environmental law are accepted only when heavily subsidized—and readily called into question at the first sign of changing economic conditions.
Yet another kind of law is possible—one that actively shapes the transformation of the productive system so as to meet the needs of present generations without compromising those of future ones. Such a framework finds its primary foundation in the very norms that structure the economy by regulating businesses and markets—corporate law, financial law, competition law, public procurement law, international trade law, and international investment law, among others.
Without a fundamental reform of economic law, as defined above, environmental law will continue to fall short of what is needed to drive the ecological transition. Adding new layers of regulation or new sustainability objectives can be helpful—but only if the underlying legal frameworks that shape economic decision-making, in both the public and private sectors, are aligned with those goals. Otherwise, we risk increasing legal complexity, compliance costs, and administrative burdens without addressing the root causes of the sustainability deficit in our economies. Only a reoriented economic law can effectively support demand for more sustainable products and steer investment away from unsustainable activities.
Since 2021, together with the TEDE research team, we have been exploring the drivers, mechanisms, and obstacles shaping the ecological transformation of economic law. Our main findings are now publicly available in a summary report entitled The Ecological Transformation of Economic Law (2025).
Available on this website, the report sets out nearly 80 proposals for reforming the legal framework, highlighting the need to revisit economic law—and its interpretation—in light of environmental concerns.
Simply dismantling environmental legislation, without at the same time using the law to redefine economic success so that it incorporates sustainability concerns, is not simplification—it is deregulation. At a time when some countries appear to be moving toward unrestrained deregulation, Europe has an opportunity to chart a different course by promoting an innovative form of ecological regulation. Such an approach would target economic activity directly, while giving operators the flexibility to meet broadly defined legal objectives. Far from undermining competitiveness, such regulation is likely to strengthen it over time—particularly as the economic and social costs of deregulation become increasingly apparent.
Aude-Solveig Epstein, Gilles J. Martin, and Marie-Alice Chardeaux