EU Ministers Back a 90% Cut by 2040 With Up to 5% in International Credits, and Push ETS2 Back to 2028

EU environment ministers meeting in Brussels on 5 November 2025 agreed the Council's position on the bloc's 2040 climate target after negotiations that ran through the night. The agreement keeps the headline goal proposed by the European Commission in July, a 90% reduction in net greenhouse gas emissions compared with 1990, but widens the flexibility in how it can be met. Under the Council's position, at least 85% of the reduction must be achieved through domestic action within the EU.

Ministers also agreed to postpone the start of ETS2, the new emissions trading system covering fuels used in buildings and road transport, from 2027 to 2028. The 2040 target has been one of the most contested climate files in the EU this year. The agreement also allowed the EU to finalise its nationally determined contribution under the Paris Agreement before COP30 in Belém, which begins on 10 November. ETS2 will put a carbon price on heating fuels and road fuels, which are currently subject to national fuel taxes and, in some countries such as Germany, national carbon pricing.

Several member states had argued that starting in 2027 could raise heating and transport costs at a politically difficult moment, particularly after the energy price shock of 2022. For energy markets, ETS2 will affect demand for heating oil, natural gas for heating, gasoline and diesel over time. The use of international credits, governed by Article 6 of the Paris Agreement, will be a significant change for the EU, which stopped accepting international credits in its emissions trading system after 2020.

If the EU becomes a major buyer of Article 6 credits from the 2030s, that would create a large source of demand for emission reductions in partner countries. The 2040 target will frame the design of the main EU emissions trading system after 2030. For power markets, the target implies that the electricity sector must be close to fully decarbonised by 2040, given that it is the sector where low-carbon options are most mature.