A group of eight European countries, including Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Switzerland, and Lithuania, have committed to eliminating fossil fuels from their power systems by 2035. These countries represent almost half of the European Union's power sector. The move follows a recent agreement on a new law, the Corporate Sustainability Due Diligence Directive (CSDDD), which aims to hold large companies accountable for environmental and human rights impacts. The directive requires companies to engage with affected communities before and during projects and mandates the development and implementation of climate transition plans for reducing emissions in line with the Paris Agreement and EU climate targets.

The European Commission has called on EU member states to strengthen their efforts to reduce greenhouse gas emissions, increase renewable energy uptake, and enhance energy efficiency measures. The assessment of member states' draft National Energy and Climate Plans (NECPs) revealed that further action is needed to achieve the EU's 2030 targets. Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Switzerland, and Lithuania have collectively committed to a fossil-free power sector by 2035, aiming to decarbonize their electricity systems five years earlier than the broader EU goal.

The European electricity system is anticipated to be nearly decarbonized by 2040, supporting the EU countries' collaborative efforts to achieve their targets and mitigate carbon leakage across the region. The move is considered a significant stride toward a fossil-free European power sector by 2035, aligning with the International Energy Agency's 1.5-degree Celsius-compatible global energy scenario.

Additionally, the European Council and Parliament reached a provisional agreement on the Corporate Sustainability Due Diligence Directive, requiring large companies to address their environmental and human rights impacts. The directive sets criteria based on the company's size and global net turnover, with non-EU companies affected if they have a net turnover of over €150 million in the EU. The new law aims to provide a legal framework for communities to hold companies accountable for human rights abuses and environmental harm in European courts.

The Corporate Sustainability Due Diligence Directive, expected to be officially approved in early 2024, will usher in a comprehensive legal framework, allowing affected communities worldwide to sue companies for violations. It mandates companies to develop and implement climate transition plans, setting them on a path to reduce emissions in line with the Paris Agreement and EU climate targets. However, the financial sector secured a broader carve-out, exempting banks and insurers from ensuring their investments are not linked to human rights abuses.