Regulations end where power begins.
The EU climate regulation system is not uniform. Its scope is defined by specific provisions, legal definitions, and regulatory thresholds. As a result, some emissions remain outside the climate accountability framework — not because regulations do not exist, but because their scope does not cover all emission sources. In this section, we present the key regulatory mechanisms that give rise to these gaps.
Analysis based on EU ETS data, reports from international institutions, a review of EU emissions regulations, and consultations with international experts.
| Sector | Legal Gap | Regulatory Status | Scale of Issue | Regulatory Proposal |
|---|
How regulatory gaps in climate policy emerge
In many cases, the problem is not the absence of climate regulations, but their design. The system contains sectoral exemptions, regulatory thresholds, and limited emissions reporting requirements, which means that certain high-impact activities remain outside the climate accountability framework. This applies to, among others, private aviation, superyachts, investment portfolio emissions, and parts of global production chains.
The most common mechanisms behind regulatory gaps
Regulatory gaps in the EU climate system most often stem not from the absence of rules, but from how those rules are designed. They tend to arise in three areas: sectoral exemptions, regulatory thresholds, and the absence of mandatory reporting for certain emissions.
Sectoral exemptions
Certain sectors have been partially exempted from regulation through legal definitions and the scope of application of directives. This applies to, among others, private aviation, superyachts, and parts of maritime transport.
Regulatory thresholds
Many regulations apply only to entities above a certain scale of activity or unit size. As a result, some emissions fall outside the system solely due to formal eligibility criteria.
Absence of mandatory reporting
Certain emissions are not subject to mandatory reporting at the asset owner level. This applies in particular to emissions generated by investment portfolios of high-net-worth individuals.
Displacement of emissions
Some emissions are displaced outside the regulatory system through global production chains. This applies to, among others, the textile industry, agricultural production, and the export of pesticides banned in the EU.
The consequences of regulatory gaps
Regulatory gaps are not merely a technical problem. In practice, they mean that some of the most emissions-intensive sectors of the economy operate outside any real climate accountability. As a result, the costs of the energy transition are borne primarily by the sectors and households that fall within the regulatory framework. Understanding these mechanisms is the first step toward closing them.