Negotiators from the European Parliament and Council have reached a provisional political agreement on an amendment to the EU Climate Law, setting a new, intermediate and binding 2040 EU climate target of reducing net greenhouse gas (GHG) emissions by 90% compared to 1990 levels.

From 2036, up to five percentage points of the emissions reductions (two percentage points more than proposed by the Commission) can come from high-quality international carbon credits compatible with the Paris Agreement. Following a push from Parliament, further safeguards to the international carbon credits were incorporated in the text including the prevention of funding of projects in partner countries that run contrary to the strategic interests of the EU.

The Commission will analyse different options for the role of international credits in the upcoming EU climate legislation to reach the 2040-target and in this context made a statement recalling the need to ensure the stability of the EU emissions trading system (EU ETS).

The deal also includes the possibility for domestic permanent carbon removals to be used to compensate for hard-to-abate emissions in the ETS as well as enhanced flexibility within and across sectors and instruments to achieve targets that are as cost effective as possible.

The introduction of the EU’s ETS2 will also be postponed by one year from 2027 to 2028. ETS2 covers CO2 emissions from fuel combustion in buildings and road transport.

The European Climate Law makes the goal of climate neutrality by 2050 a legally binding obligation for all EU member states. It also establishes a legally binding target for the EU to reduce net GHG emissions by at least 55% by 2030, compared with 1990 levels.