EU Softens 2040 Climate Goal by Allowing Limited Use of Global Carbon Offsets

The European Commission has confirmed its recommendation for the EU to cut net carbon emissions by 90 per cent by 2040 compared to 1990 levels. But there's a twist: member states may be allowed to meet part of this goal by purchasing carbon credits from developing countries. This idea, part of a long-awaited and repeatedly delayed proposal, was laid out on Wednesday, July 2.

The Commission had been under pressure to maintain both the 2040 date and the ambitious 90 per cent target, especially as the bloc pushes toward climate neutrality by 2050. However, some of the EU’s biggest economies, France, Germany, Italy, Poland, and the Czech Republic, lobbied for more flexibility. They wanted room for countries to offset some of their emissions using credits, rather than only through direct reductions.

Under the current proposal, credits would be limited to no more than 3 per cent of the 2040 goal. These would need to be bought through official international carbon market mechanisms, such as those endorsed by the United Nations. The credits could only be applied starting from 2036 onward. According to the Commission, this represents a "limited role" for offsets. Some countries, however, such as Italy and the Czech Republic, had pushed for that percentage to be higher.

The idea behind this allowance is to alleviate concerns among member states that setting a challenging target now might undermine economic resilience, particularly for countries seeking to boost industrial output.

“Today, we show that we stand firmly by our commitment to decarbonise the European economy by 2050,” said Commission President Ursula von der Leyen. “The goal is clear, the journey is pragmatic and realistic.”

EU climate commissioner Wopke Hoestra added: “We are staying the course on the clean transition. We know why we’re doing it – for economic, security and geopolitical reasons.”

But not everyone’s on board. Climate advocacy groups are pushing back hard. They argue that allowing offsets could delay meaningful cuts within the EU and divert funds to questionable or unregulated overseas projects.

Transport & Environment’s climate policy manager Federico Terreni said: “Allowing offsets to meet climate goals is a cop out and risks making a paper tiger out of the European Green Deal. No evidence suggests that offsets work as intended, and it reflects a worrying erosion of European climate regulations. It would also massively damage the EU’s leadership and credibility as we approach COP30.”

All of this comes at a time when Europe is experiencing the direct consequences of climate change. It is already the fastest-warming continent, and this week saw severe heatwaves roll across Italy, Germany, Spain, France, and the UK.

A formal vote on the 2040 proposal is expected in September. If the proposal passes, the Commission plans to follow up in 2026 with legislation setting out rules for both the buying and selling of carbon credits.

Furthermore, the Commission is proposing changes to the EU Emissions Trading System. This is the cap-and-trade framework that limits the amount of pollution large industrial players can emit before facing penalties. The new proposal would give companies greater flexibility by making it easier to trade allowances. Sectors that are struggling to decarbonise could buy more time by purchasing credits from those moving faster on their emission cuts.

Earlier in March, the Commission floated a two-year grace period for the EU's 2025 automotive emissions target. That too reflects a broader effort to soften the path to 2050, as pressure mounts to balance climate ambition with political and economic realities.