Five forthcoming European Union regulations could cost the bloc €159 billion in annual GDP and put almost 420,000 jobs at risk between 2026 and 2030 if they follow what researchers describe as a restrictive regulatory approach, according to a study by the European Policy Innovation Council (EPIC).
The figures are not a forecast of the economic impact of the regulations as they will ultimately be adopted. They represent EPIC’s modelling of a restrictive baseline compared with what it considers more proportionate and better-sequenced alternatives.
The paper, The Hidden Cost of EU Regulation, argues that “policy uncertainty has emerged as a structural feature of EU governance”, creating economic costs that could largely be avoided through different policy design.
The authors point to a tendency for “ambitious targets in the industrial and climate domains” to be advanced without sufficiently reconciling competing interests or testing their economic sustainability and long-term feasibility.
According to the study, non-economic priorities can override industrial competitiveness, driving up costs, delaying investment and undermining confidence in EU policymaking.
“Major policy decisions are taken without adequately accounting for the structure of the markets it seeks to transform, their co-dependencies and wider impacts,” the report says.
EPIC examines three existing policy files as examples: the EU-Mercosur trade agreement, the planned phase-out of combustion-engine cars and the Common Agricultural Policy (CAP).
The three cases are associated with an estimated “frictional cost” of around €63 billion per year, equivalent to 0.35 per cent of EU GDP.
In the Mercosur case, EPIC argues that the EU relied on distributional assessments that were more than 15 years old, leaving the agricultural consequences insufficiently addressed until late in the process.
The resulting political pressure contributed to proposed additional agricultural support and safeguards, while legal uncertainty surrounding the agreement could delay or prevent billions of euros in investment, according to the study.
The automotive transition is presented as another example of policy being adopted before its wider economic consequences were fully assessed.
EPIC estimates that the sector has lost around €30 billion in economic value annually since the launch of the Fit for 55 programme, alongside €6.6 billion in foregone investment.
The report’s third example is the CAP, where it estimates that allocative inefficiencies result in around €27 billion in annual economic losses.
EPIC argues that the same problems could be repeated in five forthcoming areas: The next Tobacco Products Directive, artificial intelligence regulation, the Packaging and Packaging Waste Regulation, the Carbon Border Adjustment Mechanism (CBAM), and biotechnology and novel-food approvals.
Under its restrictive baseline, the five measures are projected to generate €159 billion in annual GDP losses and put 419,000 jobs at risk on average each year between 2026 and 2030. The model also estimates a €36 billion annual shortfall in investment.
EPIC argues that much of this impact could be avoided through more proportionate rules, phased implementation and greater differentiation between sectors and products.
Under its alternative scenarios, the annual GDP loss falls to around €33 billion and the number of jobs at risk to about 178,000.
Compared with the restrictive baseline, this represents roughly €125 billion in additional GDP and 241,000 jobs each year, alongside around €28 billion in additional annual investment.
Italian Prime Minister Giorgia Meloni has sharply criticised the European Union, describing it as a “short-sighted bureaucratic giant” whose excessive regulation is stifling industrial development and undermining the bloc’s global competitiveness. https://t.co/Y3Fhf0iysB
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The largest individual impact comes from the proposed revision of the Tobacco Products Directive.
Under the restrictive scenario, EPIC estimates an annual GDP loss of €48 billion, including €24 billion in lost VAT and excise revenue, with 120,000 jobs at risk and an €11 billion investment shortfall.
A risk-differentiated approach that treats products such as heated tobacco and e-cigarettes differently from conventional cigarettes produces a radically different result in the report’s modelling.
It would differ an estimated €32 billion annual net GDP gain, including around €16 billion in additional tax revenue.
EPIC estimates that the legal tobacco chain currently accounts for €224 billion in GDP, 2.1 million jobs and €112.9 billion in annual excise revenue. It puts illicit cigarettes at 9.2 per cent of consumption, corresponding to €14.9 billion in missing tax revenue.
The other four files have smaller, but still highly significant, estimated impacts.
A restrictive CBAM is associated with €44 billion in annual GDP losses and 118,000 jobs at risk. The packaging regulation is estimated at €42 billion and 112,000 jobs.
AI rules account for €24 billion in annual GDP losses and 62,000 jobs at risk, while delays affecting biotechnology and novel-food approvals are estimated to cost €1.6 billion and 6,760 jobs each year.
In each case, EPIC finds that changes to the design or timing of the rules could reduce the economic impact.
German Chancellor Friedrich Merz has said the European Union has hobbled its own competitiveness through excessive regulation and bureaucracy. https://t.co/bZfAYTa9Tj
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A phased rollout of the packaging rules, for example, is estimated to cut their GDP impact by 57 per cent, while a more proportionate approach to AI regulation could recover around €12 billion annually.
The report argues that the cost is not simply the regulation itself, but (also) the uncertainty surrounding it: What companies will have to comply with, when rules will take effect and whether they will later be changed.
It points to the EU’s 2035 combustion-engine phase-out as an example. The rules were revised in 2025, after manufacturers had already made investment decisions based on the original framework. EPIC argues that such changes can leave companies paying for decisions made under rules that no longer apply.
Mercosur provides another example of what the authors describe as poor sequencing. The agreement’s distributional effects were not adequately addressed upfront, they argue, leaving the CAP to absorb some of the resulting pressure.
EPIC’s proposed solution is what it calls “Stability-by-Design”: Predictable rules, distributional modelling before adoption, and assessments of the cumulative impact of different regulations rather than treating each file in isolation.
The approach would not require the EU to abandon its environmental, health or technological objectives, the report argues. Instead, EPIC says those objectives should be pursued in a way that accounts for economic incentives, sectoral differences and the costs imposed by regulation.
The European Policy Innovation Council is a Brussels-based think tank registered as a non-profit organisation and on the EU Transparency Register.
COMMENT: Europe burns, Brussels regulates: The fatal hypocrisy of von der Leyen’s bureaucracy, writes @bogdanosk https://t.co/BgXGYZj209
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