EU formalises binding 2040 emissions target with carbon credit flexibility

The Council of the European Union has given its formal approval to an amendment to EU environmental law, establishing a legally binding commitment to reduce net greenhouse gas (GHG) emissions by 90% by 2040 relative to 1990 levels. The move completes the legislative process, following the European Parliament's adoption of its position earlier this year.

A European city is moving towards cleaner, more environmentally friendly development. AI generated picture.

The 2040 goal is designed as an intermediate milestone between the EU's existing 2030 targets and its overarching objective of achieving full environmental neutrality by 2050. It will anchor the bloc's environmental and energy policy beyond 2030 and guide forthcoming legislative proposals from the European Commission.

The amended law includes a range of flexibilities aimed at supporting member states and industry through the transition. From 2036, a capped volume of high-quality international carbon credits will be eligible to count towards the target. The legislation also provides for permanent carbon removals to address residual emissions in hard-to-abate sectors — those where eliminating emissions entirely remains technically or economically unfeasible.

The law also delays the launch of the EU's new emissions trading system (ETS2), which covers road transport, buildings, and other sectors, pushing the start date back one year from 2027 to 2028. The overall framework seeks to balance emissions ambition with economic competitiveness, energy security, and a socially equitable transition.

'Today's adoption of the landmark 2040 climate target will give industry, citizens and investors the reassurance they need for the clean transition in the decade ahead,' said Maria Panayiotou, Cyprus' environment minister.