After months of political deadlock, the adjustment of the EU’s climate law received approval accompanied by substantial flexibilities allowing member states to achieve a 90% reduction in emissions by 2040. The European Parliament now must provide its input on the bloc’s updated climate goal.
European environment ministers endorsed a diluted revision of the EU’s climate law following the integration of multiple flexibilities designed to assist member states in cutting greenhouse gas (GHG) emissions by 90% by 2040, a compromise deemed essential by the Danish Presidency leading the EU27 to finalize the agreement.
“We engaged with all parties at the table to reach a strong agreement. We have committed to a legally binding 2040 headline target of -90%, with an 85% domestic target plus up to 5% from international credits. The flexibilities proposed remain confirmed,” said Climate Action European Commissioner Wopke Hoekstra to the press.
After a political stalemate and extended discussions late Tuesday, ministers accepted an increased allocation of polluting credits for industries to facilitate their transition to climate neutrality by 2040, with the finalized resolution only emerging on Wednesday morning. This deadlock threatened the bloc’s ability to agree on binding climate objectives, which many view as a significant barrier to European industry’s growth prospects.
The finalized agreement sets the cap on polluting credits — also called international carbon credits — at 5%, up from the European Commission’s initial 3% proposal. In addition, an extra 5% might be considered through a revision clause if the bloc strays from the 90% reduction trajectory.
Countries like Finland, Germany, the Netherlands, Portugal, Slovenia, Spain, and Sweden advocated for maintaining the 3% limit on polluting credits, whereas France and Italy pushed for 5%, and Poland demanded 10%.
Environment ministers concurred on using 2036, as proposed by the EU executive, as the start year for polluting credits application, while also considering a pilot phase spanning from 2031 to 2035.
“The pilot phase intends to demonstrate to some parties the support for using these credits, but it carries risks and requires scientific validation,” a EU diplomat told Euronews.
Carbon credits function as tradable certificates enabling industries to offset a portion of their emissions while encouraging pollution reduction through financial incentives.
Each credit corresponds to one metric tonne of CO2 either reduced or captured from the atmosphere. Yet, environmental organizations strongly oppose carbon credits, contending they do not lower emissions but instead relocate them to less affluent countries.
Reaching agreement on the 2040 climate target required more ambitious nations to concede certain points, described by EU diplomats as “painful” yet vital to secure a qualified majority necessary for ratifying the deal.
Czechia, Hungary, Slovakia, and Poland opposed the law’s revision, with Belgium and Bulgaria abstaining.
The EU is revising the European Climate Law, which commits the bloc to achieve climate neutrality by 2050 compared to 1990 emissions levels. This legislation mandates setting a 2040 climate goal to bridge the gap between 2030 and 2050 targets.
Certain EU member states worry that reducing GHG emissions by 2040 could heavily damage the competitiveness of European industries. They argue that more stringent climate regulations and environmental policies lead to increased production expenses, especially in energy-intensive sectors such as steel manufacturing.
According to the bloc’s climate law, the plan involves decarbonizing traditional heavy industry operations by employing technologies like carbon capture and electrification. Additionally, clean technologies, including heat pumps and electric vehicles, are part of the gradual strategy to decarbonize the EU economy.
Many EU countries excelling in clean energy generation or on track to reach climate neutrality support the 2040 climate target, though some remain hesitant.
Simultaneously, the EU faces pressure to present a unified and ambitious stance at the forthcoming UN climate summit, COP30.
Enabling policy conditions
International carbon credits, carbon removals, and a revision clause are among the flexibilities that enabled the delicate agreement on Wednesday despite concerns from more ambitious member states regarding the bloc’s credibility in the eyes of investors who require political stability to enable clean technology investments.
The most recent amendments, reviewed by Euronews, introduced an emergency brake, proposed by France, concerning CO2 emissions and removals linked to land-related activities. This mechanism can only be activated five years after the law enters into force.
With forest health declining and carbon capture and storage technologies yet to deliver, this emergency brake aims to identify alternative methods for EU countries to balance emissions that would otherwise be absorbed by natural carbon sinks.
“Realistic expectations are necessary regarding CO2 removals from land and forests (…) safeguards are needed so other sectors cannot compensate for deficiencies in this sector,” stated an EU diplomat.
“The risk of not having a European Climate Law outweighs the drawbacks of including a revision clause,” remarked an EU diplomat from an ambitious country on Tuesday, emphasizing the urgency of adopting a position.
After months of deadlock, the most proactive countries consider revising the domestic climate law crucial for the EU to finalize a global climate target for presentation at COP30.
“If a 90% climate law is achieved, we can accept a range for the 2035 climate target to present at COP30,” a diplomat explained, referring to the range between 66.25% and 72.5% agreed upon by EU environment ministers in September.
Balancing climate and defence with competitiveness
Although supporting the revision of the EU’s climate law, German environment minister Carsten Schneider highlighted Wednesday’s vote as an act of self-determination and autonomy for the EU, underscoring the competitiveness challenges the bloc confronts.
“On one side, we face a close partner, the USA, which has stepped away from international climate protection policy. On the other, we contend with China on competitiveness,” Schneider remarked during a press briefing.
The German minister asserted that the EU must lead in clean technologies and innovations, underscoring their importance for future markets.
“The intersection of environmental protection, climate policy, and economic policy is critical,” he added.
Czech environment minister Petr Hladík noted that economies in central and eastern Europe are struggling, insisting on technological neutrality to enable member states to employ the most cost-effective means to attain climate goals.
“It is important to consider that for some countries, sectors hard to decarbonize — such as chemicals, steel, cement, and glass — constitute a large share. Technologies in these areas are not yet fully developed,” Hladík said.
Besides the challenge of balancing competitiveness with climate ambition, Romania recalled the current geopolitical context, mentioning the “bloody war” at the EU’s and Romania’s borders, emphasizing the profound changes since the climate law’s adoption in 2021.
“The present geopolitical situation requires citizens and businesses to cover defence expenses that have surged dramatically over a short timeframe,” stated Romanian environment minister Diana-Anda Buzoianu.
Members of the European Parliament will now vote on the 2040 climate target and proceed with negotiations involving EU countries.