THE EU COMMISSION HAS CONFIRMED THE TARGET OF A 90% REDUCTION IN EMISSIONS WITHIN 15 YEARS
As announced in the preceding days, on July the 2nd 2025, the European Commission published the draft that will serve as the basis for the discussion with the European Council and the European Parliament on the new climate target for 2040. The proposal was eagerly awaited, given the political controversy sparked by the announcement of the new target a year ago, before the European elections: a 90% reduction in emissions by 2040 relative to 1990 levels.
This proposal, presented at the end of President Von der Leyen’s first term, had created a deep rift in the European People’s Party, given the opposition of a large part of its base, which had called for less ambitious targets considering wars and the economic crisis.
The figure of 90% did not solely arise from the political debate: it was actually the minimum threshold outlined by the European Scientific Advisory Board on Climate Change (ESABCC), which had already indicated in June 2023 that the only way for the EU to stay on a trajectory compatible with the Paris Agreement targets would be to promote a 90-95% reduction in emissions by 2040 relative to 1990 levels. This is the only way for the European Union to contribute to keeping global temperatures within 1.5°C of average warming by the end of the century, even though with limited and temporary overshoots (such as that observed in 2024).
The proposal published on the 2nd of July 2025 by the Commission aims at maintaining that ambition, confirming the target announced in 2024 of a 90% reduction relative to 1990 levels. Several members of the Commission have made no secret of the strong tensions that have arisen while reaching this political decision – which will not be final until the conclusion of the approval process among European bodies. In the days immediately preceding the publication of the text, some particularly heated statements were made, starting with Commissioner Teresa Ribera, who complained about the lack of ambition of some of her colleagues, including French President Macron, also in view of what will be the “derived” target from the 2040 target, namely the interim target for 2035, which the European Union must submit to the United Nations under the Paris Agreement by COP30.
The final text, which is very short (the portion regarding the new target and related amendments to the current directive is less than two pages long), provides for three flexibility clauses or new features with respect to the overall target: one on carbon credits from activities in third countries, one on CO2 removals applied in the EU under the CRCF (Carbon Removals and Carbon Farming) Directive, and the last one on flexibility within the target itself.
Regarding the possible use of carbon credits from projects in other countries, the proposal indicates a maximum limit of 3% of the overall target, with possible implementation from 2036 and only once certain key conditions regarding the quality and integrity of the projects in consideration have been established. In any case, the use of foreign credits will only be possible outside the European carbon market (ETS). By reopening the door to credits (after closing it in 2012 in light of the extremely low reliability of the previous CDM system, now replaced by Article 6 of the Paris Agreement), the European Commission wanted to send a message to the EPP, which – from the coalition agreement that brought the Merz government to power in Germany – had strongly called for the introduction of this flexibility mechanism. The decision was also a way to send a message to key partner countries, especially in Africa, which see carbon markets as an interesting opportunity to create liquidity and jobs. According to some sources, it was Commissioner Hoekstra himself who pushed the main German parties to include carbon credits in the coalition agreement, to facilitate the discussion on the 90% reduction target, which would otherwise be almost impossible, given the opposition of the main manufacturing groups.
The second clause, a novelty announced by the Commission through a series of events held in Brussels in the recent months, regards the possibility of including European projects of permanent CO2 removal in the European carbon market (the ETS system) starting from its revision in 2026, with a likely start date of 2030. These projects are regulated at European level by the CRCF Regulation of 2024, which lays down basic methodologies for the design, registration and monitoring of land use projects within the European Union.
In this case, we are not talking about flexibility on emissions reductions, but rather the absorption of the remaining 10% of industrial emissions that are difficult to reduce, but which must be eliminated (precisely through “domestic” removals) by 2050. With this opening, the Commission hopes to create sufficient demand for credits to develop the sector of medium and large-scale carbon removal, which is still very limited in terms of volumes. Finally, the third and last new feature concerns a “cross-sector” flexibility clause, also designed as a political response to internal pressure within the Parliament and the Commission and still to be defined in practice.
In the days leading up to the publication of the proposal, there were rumors regarding the possibility for the Commission to outline more specific targets (including regarding foreign credits and the use of European CRCF credits) to make up the 2040 macro-target. The Commission ultimately opted for a single target with flexibility clauses through international cooperation and initial regulation of the governance of removals at domestic level. Regarding the use of credits generated by projects in third countries, the current text leaves room for future debate on the construction of the new system, which will be deeply different than the one in force under the Kyoto Protocol.
The text states that credits must be in line with the rules established under Article 6 of the Paris Agreement and generated by “credible and transformative” projects. Furthermore, it is expected that these credits will have to come from partner countries with a clear climate neutrality target and policies compatible with the two objectives of the Paris Agreement (limiting global average temperature rise to +1.5°C or 2°C by the end of the century).
However, the current text does not indicate how the European Union intends to implement these criteria, either in terms of the quality and integrity of the credits (even though an alignment with the recent Oxford Principles is likely) or with regard to the countries of origin. In fact, in the UNFCCC context, according to the principle of nationally determined contributions, all countries theoretically have NDCs (national climate plans) aligned with the Paris Agreement.
Therefore, the European Union appears ready to draw up a list of countries with policies compatible with Paris at the expense of others, a move that we expect will provoke outrage from many G77 countries now eager to enter the huge European carbon market, which in 2023 traded credits for a total of €770 billion, compared to a global (voluntary) credit market in free fall after the scandals of 2023 and now standing at just over half a billion dollars. It will be interesting to see, however, how the Commission intends to get Member States and industries to act on this flexibility option, given the inclusion of CRCF credits but the exclusion of credits originating in third countries – perhaps through international cooperation actions under the new Clean Trade and Investment Partnerships.
Photo: Lukasz Kobus © European Union, 2025