Carbon Credits
The European Commission is poised to include international carbon credits as part of its legally binding 2040 climate target, according to a draft summary of the proposal seen by Reuters.
The move marks a significant shift in the EU’s approach to climate action, potentially easing the burden on domestic industries while drawing fresh scrutiny over the integrity of global carbon markets.
The full proposal is scheduled to be officially presented on July 2, but the leaked document outlines the Commission’s evolving strategy for reducing greenhouse gas emissions. Originally, the EU executive had aimed for a 90% net reduction in emissions compared to 1990 levels.
However, growing resistance from member states such as Italy, Poland, and the Czech Republic—concerned about the economic burden of such ambitious climate action—has prompted Brussels to build greater flexibility into the target.
Central to this new flexibility is the plan to allow up to 3% of the 2040 emissions reduction target to be achieved using “high-quality international credits.” These credits, which would be phased in starting in 2036, would be sourced from carbon offset projects in other countries—such as reforestation or renewable energy initiatives in developing nations.
The credits must meet criteria set by a UN-backed carbon credit system, with further EU legislation expected to define the quality standards, project origins, and purchasing mechanisms.
By using external credits, the EU would effectively reduce the pressure on European industries to cut emissions domestically—making the 90% target less stringent in practical terms. Critics warn that this could weaken the EU’s climate integrity, especially given past scandals involving carbon offset schemes that failed to deliver verified environmental benefits.
Supporters, however, argue that incorporating carbon credits could serve as a lifeline for financing decarbonisation projects in poorer countries, helping the global South transition to cleaner energy sources while enabling the EU to stay on track with its emissions goals.
In addition to international offsets, the Commission is considering allowing industries to purchase CO₂ removal credits—from technologies that extract carbon directly from the atmosphere—through the EU’s Emissions Trading System (ETS).
These removals, which might include carbon capture and storage (CCS) or direct air capture (DAC), would be integrated into the EU carbon market to allow polluters to offset part of their emissions with “negative emissions.”
The draft also outlines other flexibilities, including giving member states more discretion in choosing which sectors of their economies should bear the brunt of emissions reductions. This provision is aimed at achieving the target in a “cost-effective” way, allowing countries to tailor their decarbonisation strategies according to national priorities and economic conditions.
A spokesperson for the European Commission declined to comment on the leaked proposal, noting that the final version is still subject to change before its official release. Once published, the proposal will undergo negotiation between EU member states and the European Parliament, both of which can amend the terms before the climate target becomes law.
The inclusion of carbon credits signals a strategic compromise: balancing the EU’s climate ambitions with mounting political and economic pressures at home—especially amid rising costs of the green transition and competing budgetary priorities such as defence.
Whether this compromise enhances or undermines the EU’s climate leadership will depend on how rigorously the quality of these credits is defined, verified, and enforced.
