European Commission has proposed on Wednesday, 2 July, an amendment to the European Climate Law setting a 2040 EU climate target of 90 per cent net emissions reduction, compared to 1990 levels. Commission’s proposal includes a number of flexibilities including international carbon credits and domestic permanent removals in the EU Emissions Trading Systems.
In its press release, the Commission labels the proposal as “a pragmatic and flexible pathway towards a decarbonised economy that will provide the necessary predictability and stability for investments in the EU’s clean energy transition and driving industrial competitiveness (…) It gives a strong signal of stability and predictability to European industry and investors to drive business decisions and investments.”
According to the Commission, the amendment of the European Climate Law also responds to the strong popular support for climate action in Europe. The 2025 Climate Eurobarometer, released on 30 June, shows that 85 per cent of EU citizens consider climate change a serious problem, with 81 per cent supporting the EU’s objective of becoming climate-neutral by 2050.
At the international level, the EU is required to submit an updated Nationally Determined Contribution (NDC) under the Paris Agreement, ahead of the UN Climate Change Conference (COP 30) that will take place in November 2025 in Belém, Brazil. The Commission will now work with the Council Presidency to finalise the communication of the EU’s NDC.
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Flexibility as a key word
The Commission’s proposal recognises that there are different measures to support EU member states and industry in meeting the 2040 climate target and introduces so-called flexibilities in how the targets can be met.
These “flexibilities” include a limited role for high-quality international carbon credits in the second part of the 2030-2040 decade (maximal contribution of 3 per cent), the use of domestic permanent removals in the EU Emissions Trading Systems (EU ETS), and enhanced flexibilities across sectors. The Commission will ensure that the design of these flexibilities reflects the sectoral post-2030 legislation needed to achieve the 2040 climate target in a cost-effective way.
Controversial carbon credits
The role of international carbon credits, in particular, has been subject to heated debates over the past months. Some countries—e.g., Germany—argue that without using these credits (essentially a practice that supports climate-friendly investments in non-EU countries and allows to deduct such CO2 reductions from its own tally) the 2040 climate target would not be realistic.
Critics including leading scientists object that such a practice would slow carbon cuts that would, were it not for the trade-off scheme, inevitably need to happen at home. In their view, carbon credits could also pull funds away from local investments in pricey decarbonisation technologies like capturing/removing carbon.
International carbon credits undermine benefits (of the 2040 climate target) and can therefore only be used as a last resort. It’s vital for the S&D Group that upcoming legislation is aligned with a 90 per cent domestic target – Mohammed Chahim, S&D vice-president for the Green Deal
The carbon credits has already drawn criticism from the S&D, which otherwise supports the green transition. In its initial response, the group essentially welcomed the Commission’s proposal, but also warned against the risks associated with the inclusion of international carbon credits. According to Tiemo Wölken (S&D/GER), the group’s coordinator in the European Parliament’s environment committee, the political group “regrets the optional inclusion of up to three per cent in international carbon credits, which has the potential to open a Pandora’s box of loopholes and uncertainties for the EU’s climate target architecture.”
Parliament and Council will now have the say
EU co-legislators, the European Parliament and the Council are now to negotiate and adopt the Commission’s proposal under the ordinary legislative procedure. Once the 2040 climate target is in place, the Commission is to explore ways to make the new 2040 policy framework simpler. The legislation aims to provide more flexibility while ensuring compliance, and to promote convergence among member states, while taking into account their specificities.
