European Union leaders have given their backing to the use of international carbon credits in the bloc’s upcoming 2040 environmental target—an important signal for the future of global carbon markets. While the exact emissions reduction goal is yet to be agreed, the decision highlights growing political support for carbon offset mechanisms under Article 6 of the Paris Agreement.
Meeting in Brussels on 23 October, EU heads of state discussed the bloc’s next major environmental milestone but stopped short of setting a definitive number for the 2040 emissions cut. The European Council said the talks focused on ‘how to support the achievement of the EU’s intermediate climate target for 2040’, outlining three key elements for the upcoming framework.
One of these elements is the inclusion of international carbon credits. Leaders emphasised that ‘the importance of contributing to the global emission reduction effort (must be taken into account) in a way that is both ambitious and cost-efficient, notably by defining an adequate level of high-quality international credits.’
Although the absence of a concrete target leaves uncertainty for market participants, the EU’s recognition of carbon credits marks a major policy development. It suggests that verified offsets could play a more significant role in achieving future environmental goals across Europe.
Environment ministers are expected to finalise the target on 4 November, with negotiations continuing over the contribution of natural carbon sinks and international credits to the 90% reduction pathway. ‘This has been a significant achievement but the final sprint to agree the 2040 target has only just started’, said Linda Kalcher, Executive Director of a Brussels-based think tank. ‘It’s now on the Danish presidency to craft a deal that gets a majority of countries over the finish line on 4 November’,she added.
EU leaders also approved a review clause allowing the 2040 target to be adjusted in response to new scientific findings, technological progress, or global economic changes. They further called for acknowledging ‘the realistic contribution of carbon removals to the overall emission reduction effort’, while ensuring that potential gaps ‘would not be at the expense of other economic sectors.’
In addition, European Commission President Ursula von der Leyen presented plans to strengthen Europe’s competitiveness through a fair and inclusive green transition. The Council urged the Commission to ‘further develop the necessary enabling conditions’ to help industries and citizens reach the 2040 goal.
Finally, the Council noted the Commission’s proposal to review the Emissions Trading System 2 (ETS2)—set to cover road transport and building heating from 2027—to ensure the rollout remains ‘fair, pragmatic, and socially balanced.’