Europe is at a crossroads. The continent’s economic engine, long admired for its stability and innovation, is losing momentum. Rising competition from the United States and China, combined with a growing regulatory burden, threatens to make Europe uncompetitive on the global stage. Faced with this reality, the EU must confront a hard truth: overregulation is strangling its economic potential. If Europe wants to remain a global leader, deregulation isn’t just an option – it’s a necessity.
Author: Lika Kobeshavidze
The first step should be to reassess one of the EU’s most controversial policies, the Carbon Border Adjustment Mechanism (CBAM). European leaders must pause its implementation and conduct a year-long review of its economic impact and explore alternative market-driven solutions to reduce emissions.
At its core, CBAM is the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods entering the EU and to encourage cleaner industrial production in non-EU countries. The EU wants to prevent companies from relocating to regions with lax environmental standards, a phenomenon known as “carbon leakage.”
In theory, it’s a great goal. However, in practice, CBAM creates as many problems as it aims to solve. The imposition of tariffs on imports increases the cost of doing business in Europe, especially for energy-intensive manufacturers already struggling with high energy prices.
Moreover, the policy could accelerate deindustrialisation. European manufacturers who find CBAM and other regulations too burdensome may shift production to regions with lower costs. Europe’s industrial capacity would be reduced as a result, as would the goal CBAM was designed to achieve: reducing global carbon emissions. Production shifts overseas, but emissions don’t disappear – they relocate.
What’s the solution? First and foremost, European leaders must pause CBAM and launch a year-long review of its economic impact. This review should focus on key industries such as steel, cement, and chemicals, analysing how the policy affects costs, jobs, and trade competitiveness. Following the review, the EU should shift away from punitive tariffs and towards targeted subsidies and incentives for green innovation.
By providing small but effective subsidies, industries can adopt low-carbon technologies and transition to cleaner production processes. For example, the EU could fund research and development in hydrogen-based steel production or carbon capture for cement manufacturing – areas where Europe has the potential to lead globally. These incentives would reduce financial strain on businesses while reducing emissions and achieving the same environmental goals without stifling growth.
Donald Tusk’s recent call for a “big campaign of deregulation” shows how the debate about Europe’s economy is changing. Deregulation is no longer just a fringe idea from libertarians or populists—it’s now being pushed by mainstream leaders who see how badly Europe needs growth. Tusk’s warning that “our competitiveness is at stake” highlights the problem: too many rules are driving up costs and holding businesses back, especially in areas like energy and farming. This shift shows that cutting red tape is becoming less of a debate and more of a necessity.
The stakes couldn’t be higher. High energy prices and competition from countries with more business-friendly environments are already putting pressure on Europe’s manufacturing sector. As long as the EU continues to burden its industries with excessive regulation, it will both lose jobs and its status as an economic powerhouse will be diminished.
Deregulation doesn’t mean abandoning Europe’s climate goals. It means pursuing them in a smarter, more sustainable way. By pausing CBAM and rethinking its approach, the EU can protect its industries, foster innovation, and lead the way in creating a greener, more competitive future. The time for action is now. Europe must choose growth over stagnation, collaboration over isolation, and opportunity over red tape.
Cover photo credit: https://www.mining.com/
Lika Kobeshavidze is an analytical journalist and a writing fellow with Young Voices Europe, specialising in EU policy and regional security in Europe. She is currently based in Lund, Sweden, pursuing advanced studies in European Studies.
