The European Union has proposed a legally binding climate target to reduce net greenhouse gas emissions by 90% by 2040 compared to 1990 levels, marking a significant step toward its 2050 net-zero goal.
The European Commission proposed an amendment to the EU Climate Law on July 1, 2025.
For the first time, the EU will allow member states to use international carbon credits to meet up to 3% of this emissions reduction target, starting in 2036. This represents a major shift from previous policies that required all cuts to be made domestically.
The inclusion of international carbon credits introduces a global dimension to the EU’s climate strategy, aiming to blend strong domestic action with international cooperation. The EU plans to impose strict standards and criteria on the origin, quality, and use of these credits to ensure they represent real, additional emission reductions.
The carbon credits are expected to add demand for about 140 million tonnes of reductions by 2040, potentially benefiting developing countries that can sell high-quality credits under UN mechanisms.
This flexibility is intended to ease the burden on European industries facing technical and economic challenges in cutting emissions, while maintaining overall ambition. However, the proposal has faced criticism from climate campaigners who warn that reliance on offsets could undermine real domestic emission cuts and be seen as “outsourcing” Europe’s responsibility.
The proposal now requires approval from the European Parliament and all 27 EU member states, with a tight timeline to finalize rules and legislation by 2026. The 2040 target will also influence the EU’s intermediate 2035 climate goals and the path to net zero by 2050.