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EU reaches agreement on 2040 climate target, postpones ETS 2 by one year

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© Guillaume Perigois / Unsplash

On 9 December 2025, EU member states and the European Parliament reached a political agreement on the bloc’s legally binding 2040 climate target, endorsing an economy-wide cut of greenhouse gas (GHG) emissions by 90% from the 1990 level. The target is a crucial milestone to the EU’s ambitious goal of reaching climate neutrality by 2050.

The provisional agreement introduces new elements to the EU climate policy framework, including additional flexibilities for member states and companies in reaching the target:

  • Limited use of high-quality international credits towards the 2040 target from 2036 onwards. The limit is set at 5% of the EU’s 1990 net GHG emissions, with extra safeguards on credit quality to be put in place on top of those foreseen under Article 6.4 of the Paris Agreement. International credits cannot be used for compliance under the EU ETS.
  • Use of domestic permanent removals in the EU ETS.  The possibility and rules for the use of permanent removals, such as biogenic emissions capture with carbon storage (BioCCS) and direct air capture with carbon storage (DACCS), to comply with the ETS Directive requirement will be introduced during its revision in 2026. This approach would provide an option to offset residual hard-to-abate emissions without displacing the focus on domestic emission reductions.
  • Introduction of biennial assessment of the Climate Law implementation. This includes an assessment on reaching intermediate targets and decarbonization trajectories and taking into account any contextual changes, e.g. technological, scientific, competitiveness.  

As part of the provisional agreement, the start of the new ETS for buildings and road transport fuels (EU ETS 2) was postponed by one year to 1 January 2028 to give member states more preparation time. The auctioning of ETS 2 allowances will commence as planned in 2027, providing member state governments with revenues to fund decarbonisation solutions for vulnerable households ahead of the system's start. MRV obligations for compliance entities continue unchanged from 2025. 

Following the endorsement meeting of the EU Council's Permanent Representative Committee on 19 December 2025, the final compromise text of the amendments to the EU Climate Law (Regulation (EU) 2021/1119 Establishing the Framework for Achieving Climate Neutrality) was published. The EU Council and the European Parliament are to formally adopt the text in the upcoming months.

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