EU Poised to Become Top Buyer of UN Carbon Credits by 2040

The European Union could soon become the world’s largest purchaser of UN-backed carbon credits, with demand potentially reaching 350 million tonnes of CO₂ equivalent between 2036 and 2040. This would mark a major shift in the global voluntary carbon market, sparked by the European Commission’s (EC) recent proposal to tighten environmental targets.

Białowieża Forest, shared by Poland and Belarus, Europe’s largest ancient forest and a UNESCO World Heritage Site, rich in rare wildlife. AI generated picture.

Unveiled last week, the EC’s draft update to the European Climate Law introduces a bold 90% emissions reduction target by 2040, relative to 1990 levels. To help reach this goal, the Commission has opened the door to using international carbon credits from Article 6 of the Paris Agreement, capped at 3% of 1990 net emissions.

Although the 3% figure is not yet tied to a definitive number of credits, Finland’s interpretation provides a rough trajectory: if implemented incrementally from 0% in 2036 to 3% by 2040, the EU could use approximately 347.6 million tonnes of carbon credits over that five-year span. This would exceed Japan’s goal of securing 200 million tonnes by 2040.

Independent projections echo this potential. Market analyst ClearBlue Markets estimates demand could range from 315 to 378 million tonnes. Other experts, like Lambert Schneider from the Öko-Institut, suggest demand could stretch to as much as one billion tonnes by 2050, depending on how the policy unfolds.

While Nordic countries such as Finland and Sweden have expressed support for the EC’s flexible approach, others are pushing back. Finnish Minister of Climate and the Environment Sari Multala said the plan ‘creates stability for companies to invest in clean solutions.’ Sweden called the use of Article 6 a reasonable mechanism after 2030.

In contrast, Czech Prime Minister Petr Fiala called the targets ‘unrealistic,’ arguing that policies must be balanced with economic realities. His party confirmed they will oppose the proposed emissions goals in upcoming negotiations.

These differences underline the political complexity ahead. For the proposal to become law, it must gain approval from both the European Parliament and the Council. Denmark, which currently holds the rotating EU presidency, is expected to steer the legislative process forward after the summer recess.

One of the most significant aspects of the plan is the Commission’s recognition of Article 6 credits—seen by many as a lever to drive green finance into developing nations. South Pole, a major project developer, welcomed the move, calling it ‘a practical step to direct climate finance where it’s needed most.’

However, the proposal stops short of allowing these credits into the EU Emissions Trading System (ETS), instead pointing to a new centralised EU facility that could manage credit purchases at the government level. This could help prevent market distortions and ensure consistent quality across all transactions.

There are also signs of strict compliance rules ahead. Any credits used must be generated within the 2036–2040 window, in line with the Paris Agreement’s ‘no banking’ principle. In addition, EU policymakers plan to allow only domestic carbon removal (CDR) credits to enter the ETS—raising concerns about potential supply gaps as emissions caps tighten toward 2040.

As experts continue to evaluate how Article 6 credits and CDR tools will be integrated, the decisions made in the coming months will shape both the EU’s environmental pathway and the evolution of global carbon markets.