European Climate Law Sets 2040 Emissions Reduction Target

The European climate law has been formally amended following the European Council’s adoption of a binding intermediate climate objective for 2040. The regulation establishes a requirement to reduce net greenhouse gas emissions by 90% compared with 1990 levels, reinforcing the European Union’s long-term climate neutrality pathway.

This decision marks the final step in the legislative procedure. Once the amended regulation is published in the Official Journal of the European Union, it will enter into force within 20 days and apply directly across all EU member states without requiring national transposition.

Binding 2040 Emissions Reduction Objective

The updated legal framework introduces a clear intermediate milestone between the European Union’s 2030 targets and its 2050 climate neutrality commitment. By setting a mandatory 90% reduction in net greenhouse gas emissions compared with 1990 levels, the policy aims to accelerate decarbonization across multiple economic sectors.

The target reinforces the EU’s broader climate policy architecture, which includes emissions trading, renewable energy expansion, industrial decarbonization measures, and stricter efficiency standards.

Limited Use of International Carbon Credits

Beginning in 2036, the regulation allows the use of high-quality international carbon credits as a supplementary mechanism to support the 2040 climate target. However, their use is capped at a level equivalent to 5% of the EU’s 1990 net emissions.

This limitation ensures that the majority of emission reductions occur domestically. At least 85% of the required emissions decline must be achieved through internal decarbonization measures across industries, transport, buildings, and energy systems.

Adjustment to the EU ETS2 Implementation Timeline

The revised legislation also modifies the launch schedule for the European Union’s second emissions trading system. Known as ETS2, the mechanism will expand carbon pricing to sectors such as road transport, buildings, and certain additional economic activities.

Under the amended framework, the start of ETS2 has been postponed by one year. Instead of launching in 2027 as previously planned, the system will now begin operating in 2028.

Implications for Transport and Building Sectors

The delayed implementation provides additional time for governments, industries, and consumers to prepare for the transition to expanded carbon pricing. Road transport and building sectors are expected to play a significant role in achieving the new emissions reduction trajectory.

By adjusting the timeline while maintaining the ambitious 2040 emissions objective, policymakers aim to balance economic feasibility with the long-term decarbonization pathway established under the European climate law.