The European Commission has proposed a new climate target aiming for a 90% reduction in net greenhouse gas (GHG) emissions across the EU by 2040, compared to 1990 levels. The proposal introduces significant changes, including the use of international carbon credits and domestic carbon removals to meet part of the target—marking a more flexible and pragmatic approach in light of current economic, geopolitical, and security conditions.

The updated goal would amend the EU Climate Law, which currently mandates a 55% GHG reduction by 2030 and climate neutrality by 2050. The new 2040 target is intended to guide post-2030 climate and energy legislation.

Key features of the proposal include:

· Use of Article 6 International Carbon Credits: Up to 3% of the 2040 target could be met through carbon offsets starting in 2036.

· Inclusion of Carbon Removals in EU ETS: Technologies like BioCCS and DACCS would be allowed for use by hard-to-abate sectors to offset residual emissions.

· Investment Outlook: Achieving the target will require annual investments of €660 billion in the energy system and €870 billion in the transport sector from 2031–2050.

· Support Measures: The Commission has introduced tax incentives and policies like the Clean Industrial Deal State Aid Framework (CISAF) and proposed CBAM exemptions for 90% of small importers to ease compliance.

While the use of carbon credits has sparked criticism from environmental groups, who argue it could dilute real emissions reductions, others in the sustainability space have welcomed the flexibility as a step toward global carbon market integration and increased climate finance flows.

As of the end of 2023, the EU has already achieved a 37% reduction in GHG emissions compared to 1990, with strong economic growth over the same period. The Commission expects this new 2040 target to act as a critical milestone on the path to full climate neutrality by 2050.