Brussels Proposes a 90% Cut by 2040, With International Credits Allowed for the First Time

On 2 July 2025 the European Commission proposed an amendment to the European Climate Law that would set a binding target for 2040: a 90% reduction in the EU's net greenhouse gas emissions compared with 1990 levels. The EU already has a legally binding target of at least a 55% net reduction by 2030 and a goal of climate neutrality by 2050. The 2040 target would sit between them and shape policy through the 2030s.

The most discussed feature of the proposal is a set of flexibilities in how the target can be met. The most significant is that, from 2036, high-quality international carbon credits could be used to contribute up to 3% of 1990 net emissions toward the target. The second is a role for domestic permanent carbon removals within the EU emissions trading system. The third is greater flexibility across sectors and instruments, so that over-performance in one area could help offset under-performance in another.

Reuters reported that the inclusion of credits was a response to concerns from several member states about the cost of meeting a 90% domestic target, and that some governments had argued for lower targets or more flexibility. A 90% net reduction would leave only about a tenth of 1990 emissions, after accounting for carbon removals by forests, soils and technology. Meeting the 2040 target would require deep cuts in sectors where progress has been slower, including transport, buildings, agriculture and heavy industry.

The 2040 target matters for energy markets mainly through the instruments that will implement it. For gas markets, a 90% target implies falling EU gas demand through the 2030s, particularly in power generation and buildings. For electricity, the target supports continued investment in renewables, grids and flexibility. The Commission's proposal limits credits to 3% of 1990 emissions and delays their use until 2036. The proposal now goes to the European Parliament and the Council of the EU, where member states will negotiate.

The 2040 proposal comes as the EU is reviewing several related policies. Key milestones are the positions adopted by the Parliament and the Council, and whether agreement is reached before COP30.