EU finalizes 90% emissions reduction target for 2040

On November 5, climate ministers from EU member states formally adopted a resolution establishing a core target of achieving a 90% reduction in greenhouse gas emissions by 2040 compared to 1990 levels, allowing up to 5% of emissions to be offset through international carbon credits. The agreement, reached after intensive overnight negotiations, expands the role of international offsetting mechanisms—such as those under Article 6 of the Paris Agreement—providing greater flexibility for member states to meet their climate commitments.

EU Climate Commissioner Wopke Hoekstra said at a press conference: “We listened carefully to all parties and engaged in active dialogue and coordination, ultimately reaching a balanced compromise. All parties agreed to establish the 90% emission reduction target by 2040 as a legally binding overall goal, with an 85% domestic reduction requirement and up to 5% allowed to be met via international carbon credits. We have also reaffirmed the previously proposed flexible adjustment mechanism.”

The process of finalizing the EU's 2040 climate target has been fraught with difficulties. Many member states, concerned about industrial competitiveness and energy security, initially resisted stringent emission cuts. The compromise reflects deep internal tensions within the EU over the ambition level of climate policy. However, the agreement still requires further negotiation with the European Parliament before it can become law.

Industry experts widely believe the EU's decision could profoundly influence global carbon trading volumes and pricing dynamics. Frederic Gagnon-Lebrun, Global Director of Climate Policy and Finance at Zurich-based consulting firm Antarctic Group, stated: “The EU's inclusion of international carbon credits in its 2040 framework marks a critical step forward for the global carbon market. Although the 5% use of carbon credits between now and 2040 will have limited direct impact on the EU's decarbonization trajectory, their strategic deployment can serve as a valuable complement to domestic action, particularly supporting hard-to-abate sectors.”

Julia Michalak, EU Policy Lead at the International Emissions Trading Association, noted: “The removal of previous unreasonable restrictions on carbon credit use under the EU Emissions Trading System (EU ETS) is commendable. Member states’ agreement to increase the allowable share of carbon credits, launch a pilot program in 2031, and grant greater national-level flexibility demonstrates growing recognition of the value of international offsets in supporting domestic decarbonization—we welcome this development.”

Data from S&P Global Commodity Insights' Platts Energy Intelligence on November 4 showed that EU Allowances (EUA) under the EU ETS were quoted at €82.20 per tonne of CO? equivalent, while the Platts CEC price for CORSIA-eligible carbon credits stood at $21.80 per tonne of CO? equivalent on the same day.

However, several policymakers warned that without stronger policy measures and accelerated deployment of renewable energy, the EU may fail to achieve its 2040 target of a 90% emissions reduction.

S&P Global Commodity Insights analysts noted in a recent report: “Between 1990 and 2023, the EU's net greenhouse gas emissions declined by 37% cumulatively, showing a consistent downward trend. Yet even under a ‘strong policy intervention’ scenario—assuming full transformation of the energy system and consumption patterns—the EU is projected to achieve only a 76% emissions reduction by 2040.” (Rao Xinghe)