While the Trump administration in the U.S. declared an "Energy Emergency" in order to cut regulation and fast-track permitting for fossil fuel and nuclear development this week, the EU is in the process of manufacturing its own energy emergency by doing the precise opposite. The Corporate Sustainability Due Diligence Directive (CSDDD) is an emerging EU regulatory framework which seeks to impose excessive environmental, labor, governance, and reporting requirements on businesses operating with a presence in the region. 

The new regulations require that climate transition plans be aligned with the Paris Agreement’s goal of limiting global warming to 1.5°C. However, compliance is not limited to a company’s activity within the EU’s borders—operations occurring anywhere in the world are subject to the directive’s rules. The penalty for noncompliance is a staggering fine of 5% of a company’s global turnover.

Unlike voluntary “net-zero by 2050” pledges, which many American LNG firms made in the Biden era, gesturing climate-friendliness and signaling a willingness to adapt to an evolving domestic regulatory landscape, the CSDDD imposes legally binding compliance across multiple governance areas, applicable to third-party suppliers and contractors. Cost of compliance with this kind of “due diligence” is a bottomless pit for a large enough company, nearly as expensive as the confiscatory fine for non-compliance.

Last month, Saad al-Kaabi, Qatar’s Minister of Energy and CEO of QatarEnergy, threatened to cease all liquefied natural gas (LNG) exports to Europe should the EU strictly enforce the CSDDD. Qatar has been a key supplier to Europe since the start of the Russian-Ukraine war, providing up to 14% of Europe’s LNG via contracts with Germany, France, Italy, and the Netherlands. Despite Qatar’s previously announced plans to expand LNG export infrastructure and increase shipments to Europe, Minister al-Kaabi explained that his country cannot comply with the directive’s sweeping demands nor accept fines that would wipe out billions of its revenue.