Negotiators from the European Parliament and the European Council have reached a provisional political agreement to amend the EU Climate Law, setting a new, binding intermediate climate target for 2040. Under the deal, the EU will cut net greenhouse gas emissions by 90 percent by 2040 compared with 1990 levels, reinforcing the bloc’s pathway toward climate neutrality by 2050.
The agreement introduces additional flexibility in how member states can meet the 2040 target, reflecting the view of both Parliament and Council that the green transition should proceed alongside efforts to strengthen EU competitiveness. From 2036, up to five percentage points of the required emissions reductions may be achieved through the use of high-quality international carbon credits that are compatible with the Paris Agreement. This represents a higher allowance than originally proposed by the European Commission. At the insistence of Parliament, safeguards have been added to ensure that such credits do not finance projects in partner countries that conflict with the EU’s strategic interests.
Commission to assess role of carbon credits and protect ETS integrity
In parallel, the Commission committed to further analyzing the role of international carbon credits in the upcoming climate legislation linked to the 2040 target. In doing so, it emphasized the need to preserve the stability and integrity of the EU Emissions Trading System (ETS).
The agreement will also allow domestic permanent carbon removals to offset emissions that are difficult to abate under the ETS, while expanding flexibility across sectors and policy instruments to ensure cost-effective emissions reductions.
ETS2 introduction postponed to 2028
As part of the compromise package, negotiators agreed to delay the start of ETS2 by one year. The new system, covering emissions from fuel combustion in buildings and road transport, will now begin in 2028 instead of 2027. The postponement is intended to provide additional time for implementation and to allow households, businesses and member states to adapt to the new framework.
Biennial review mechanism built into revised climate law
The amended Climate Law introduces a structured two-year review cycle. The Commission will regularly assess progress toward the 2040 target, taking into account latest scientific evidence and technological developments, adequacy of net carbon removals at EU level, implementation challenges across sectors and broader economic factors, including energy prices and impacts on businesses and households. Based on these assessments, the Commission may propose further amendments, including potential adjustments to the 2040 target or additional policy measures, with the aim of safeguarding competitiveness, economic prosperity and social stability.
The provisional agreement will now be submitted for a vote in the European Parliament and must also be formally endorsed by the Council. Once adopted, the amended EU Climate Law will enter into force 20 days after publication in the Official Journal of the European Union.