The European Union, or EU, has finalized a provisional political agreement to enshrine a legally binding target of cutting net greenhouse gas (GHG) emissions by 90% by the year 2040, compared to 1990 levels.
The deal, reached late Tuesday between negotiators from the European Parliament and the Council, establishes a crucial intermediate goal on the EU’s path toward achieving climate neutrality by 2050.
The new 2040 target, which amends the European Climate Law, aims to provide certainty for investors and industry while positioning Europe as a frontrunner in global climate action.
Details:
To secure the consensus necessary for the ambitious goal, negotiators introduced several flexibilities and compromises.
A key element involves the use of carbon markets:
The agreement allows for high-quality international carbon credits to contribute up to 5% of the 90% emissions reduction target starting from 2036. This means the domestic reduction required from EU industries by 2040 will be at least 85%.
The deal also permits the use of domestic permanent carbon removals within the EU’s Emissions Trading System (ETS) to compensate for hard-to-abate emissions in specific sectors.
In a significant concession, the launch of the second phase of the EU’s carbon pricing mechanism, known as ETS2 (which extends carbon pricing to fuel combustion in buildings and road transport), will be postponed by one year, from 2027 to 2028. This delay addresses concerns raised by several member states regarding the potential economic and social impact of the transition.
Next steps:
The agreement was hailed by EU leaders as a demonstration of the bloc’s commitment to the Paris Agreement.
European Commission President Ursula von der Leyen stated that the EU is “showing our strong commitment to climate action… We have turned our words into action—with a legally binding target of 90% emissions reduction by 2040. We have a clear direction of travel towards climate neutrality.”
Wopke Hoekstra, Commissioner for Climate, Net-Zero, and Clean Growth, described the outcome as “pragmatic and ambitious,” adding that it “shows that climate, competitiveness, and independence go hand in hand.”
The provisional agreement now requires formal adoption by both the European Parliament and the Council of the EU before it can be published in the Official Journal and enter into force. The Commission will also assess progress every two years, considering factors such as competitiveness, energy prices, and scientific data, with the possibility of proposing further legislative revisions if necessary.
At a glance:
A Binding 90% Target: Goal for a 90% reduction in net GHG emissions by 2040
Flexibility and Carbon Credits: International credits cover 5%; domestic cuts must be 85%
ETS2 Postponement: The EU ETS2 launch has been delayed from 2027 to 2028.
Domestic Removals and Review: Domestic carbon removals offset emissions; the Commission reviews every two years.
