The European Union has updated its Climate Regulation by setting a new binding target of 90% reduction in net emissions by 2040, opening up to the limited use of international carbon credits from 2036, postponing the new emissions market for buildings and transport (ETS2) to 2028 and strengthening the mechanisms for periodic review of the targets. The changes, definitively approved by the European Parliament after the agreement with the Council, redesign the post-2030 climate framework on the path towards climate neutrality by 2050. The agreement was approved with 413 votes in favour, 226 against and 12 abstentions.
The reactions
“In the summer Europe is on fire, in the autumn floods destroy people’s lives. It is always the poorest who pay the highest price, the least responsible who suffer the most, while the richest continue to set our planet on fire,” said Swede Jonas Sjöstedt. For the exponent of the radical left group, “climate action cannot wait. Much of what we care about is at stake. Our mountains, our lakes, our seas and our forests and our ability to cultivate the land and create the green jobs of tomorrow”.
“The EU has chosen to double the binding targets without first addressing the issues of affordability, competitiveness and technological feasibility. The objective of a 90% reduction by 2040 risks accelerating deindustrialisation, increasing energy prices and weakening Europe’s economic and strategic resilience”, said the Polish Anna Zalewska, shadow rapporteur for the dossier of the European Conservatives group.
A new binding target for 2040
The heart of the reform is the introduction of a legally binding target of reducing net greenhouse gas emissions by 90% by 2040 compared to 1990 levels. This is a fundamental intermediate step towards achieving a climate-neutral economy by mid-century.
The rule obliges the Commission to progressively review all EU climate and energy legislation after 2030 to align it with this new target, with detailed impact assessments that take into account economic costs, industrial competitiveness, energy prices and social effects on families and businesses.
International credits and carbon removals
One of the most notable innovations concerns the introduction of margins of flexibility for Member States in how they will achieve the 2040 target. Starting from 2036, up to five percentage points of overall reductions can come from the use of high-quality international carbon credits, i.e. certificates attesting to a real reduction in emissions achieved in other countries through concrete climate projects, such as the transition to renewable energy, reforestation or technologies to capture CO₂.
In practice, each EU state will also be able to “count” on a portion of emissions avoided abroad, as long as they are additional, verifiable and permanent. For example, Italy could contribute to a project that cuts one million tons of CO₂ in India (or any country These projects will generate “credits” which are equivalent to a certain quantity of Co2 not emitted or removed from the atmosphere, which can also be resold.
These credits will have to comply with very stringent criteria, such as the absence of double counting of reductions, the protection of human rights and real environmental and social benefits in partner countries. The objective is to combine internal European efforts with a limited but credible external contribution, without turning it into a shortcut to pollute more in Europe.
Alongside this, the reform opens up the possibility of using permanent carbon removals, such as CO₂ capture and storage technologies, to offset emissions that are more difficult to eliminate in sectors covered by the emissions trading system. The objective is to recognize the growing role of technological solutions in balancing residual emissions.
A more flexible system
The changes to the Climate Law also strengthen flexibility within the European framework, allowing for greater compensation between economic sectors and emission reduction instruments. In practice, better results in one sector may help make up for delays in another, as long as each sector continues to make a real contribution to the overall effort.
This approach aims to make the path towards 2040 more cost-efficient, avoiding rigidities that would risk penalizing some national economies or specific industrial sectors.
Ets2 postponed to 2028
Another concrete change concerns the new emissions trading system for buildings and road transport, known as Ets2, a carbon market that will put a price on CO₂ produced by fuels for heating homes and cars, pushing energy and fuel suppliers to reduce emissions or pay to pollute. Its entry into force is postponed by one year, from 2027 to 2028.
The postponement responds to concerns from several Member States about the social effects of extending the carbon market to sectors that directly affect families’ living costs, such as home heating and car fuel.
Biennial checks and possible revision
The reform significantly strengthens the monitoring mechanism. The Commission will have to present every two years an assessment of progress towards the 2040 target, based on the latest scientific data, technological developments and trends in European competitiveness.
The reports will also include the evolution of energy prices, socioeconomic impacts, carbon removal levels and any implementation difficulties. If significant deviations or new structural problems emerge, Brussels will be able to propose changes to the Climate Law, including an adjustment to the 2040 target or new support measures for industry and citizens.
What is the European Climate Law
The European Climate Law, adopted in 2021, made the objective of climate neutrality by 2050 legally binding and set a minimum reduction in emissions of 55% by 2030 compared to 1990 levels. The regulation also provided for the introduction of an intermediate objective for 2040, without however establishing its extent.
With the reform now approved, the EU fills that gap by setting for the first time a binding target for 2040, equal to a 90% reduction in net emissions, which becomes the new central stage on the path towards climate neutrality.
The Commission proposed the new 90% target after an in-depth scientific and economic analysis, taking into account IPCC reports (Intergovernmental Panel on Climate Change), industrial needs and the need for a just transition.
