The EU's 90 Per Cent 2040 Target Survives, but the Flexibilities Will Decide What It Means

On 5 November 2025 EU environment ministers agreed the Council's position on amending the European Climate Law to set a binding 2040 target of a 90 per cent reduction in net greenhouse gas emissions compared with 1990. The headline number is the one the Commission proposed in July. But the Council's text adds significant flexibilities. Member states will be able to use high-quality international carbon credits for up to 5 per cent of 1990 net emissions, from 2036 onwards, with a pilot period from 2031 to 2035.

That corresponds to a domestic reduction of 85 per cent. The deal was reached under pressure to give the EU a position before the COP30 climate conference in Belém. Our view is that keeping 90 per cent as the headline was important for the EU's international credibility and for investor signals. A 2040 target bridges the existing 2030 goal of at least a 55 per cent cut and climate neutrality in 2050. Reaching agreement at 90 per cent, when some member states had pressed for lower numbers or for delay, was a meaningful achievement.

There is a defensible case for some use of international credits: they can channel finance to developing countries and achieve reductions where they are cheapest. The European Parliament has signalled support for the 90 per cent target in its own position, so the trilogue negotiations will focus on the detail of these flexibilities rather than on the headline. Permanent carbon removals, such as direct air capture with storage or bioenergy with carbon capture, will be allowed within the emissions trading system to compensate for residual hard-to-abate emissions.

ETS2 is the carbon market for fuels used in buildings and road transport. For power and industry, the 2040 target maintains the long-term direction for the existing emissions trading system. The Council has protected the 90 per cent headline while giving member states several ways to meet it with less domestic effort.