The European Union's budget watchdog has criticized proposed changes to the bloc's fiscal rules that would exempt government spending on reducing fossil fuel use from existing budget constraints.

The oversight body warned that the exemption could be misused and potentially repeat policy mistakes made during the 2022 energy crisis, when emergency spending measures led to significant fiscal strain across member states.

The proposed rule change would allow EU governments to increase spending on renewable energy projects, energy efficiency measures, and fossil fuel reduction initiatives without counting such expenditures against their deficit and debt targets under the bloc's fiscal framework.

Critics argue that creating carve-outs in budget rules, even for climate-related spending, could undermine fiscal discipline and provide governments with loopholes to justify excessive spending. The watchdog's concerns reflect broader debates within the EU about balancing climate transition goals with maintaining sound public finances.

The timing of the criticism comes as EU member states face competing pressures to accelerate their green transition while managing elevated debt levels following the pandemic and energy crisis responses. The final decision on the rule changes will require approval from EU finance ministers and the European Parliament.