European Union officials have reached a landmark political agreement on the bloc’s 2040 environmental framework, setting a collective ambition to cut net emissions by 90% from 1990 levels and defining how international carbon credits may contribute to that goal. The deal, struck after nearly 24 hours of negotiations in Brussels, also delays the launch of the EU’s second emissions trading system (ETS2) by one year.
Young saplings in front of the EU headquarters, with ministers meeting in the background. AI generated picture.
A central element of the agreement is a cap on the use of Article 6 international carbon credits. Under the adopted compromise text, high-quality credits can cover ‘up to 5% of 1990 EU net emissions’ toward the 2040 target. According to the document, this corresponds to a domestic emissions reduction of 85% by 2040. Use of these credits is scheduled to begin in 2036, although ministers left open the possibility of a ‘pilot period… for the period 2031-2035’.
This final deal goes further than the European Commission’s July proposal, which had suggested a 3% contribution limited to sectors outside the long-standing Emissions Trading System (ETS1). By removing that restriction, ministers have effectively created the option for Article 6 credits to be incorporated into ETS1 after 2030, a move that could help lower compliance costs for power generators, heavy industry, and aviation.
The text also addresses the phase-out of free allowances in ETS1. It states that “the Commission should timely consider a slower phase out-pathway for free allocation of allowances from 2028 onwards”, signalling openness to additional support for sectors navigating decarbonisation and global competition. Currently, free allocations are set to taper to zero by 2034 as the EU’s carbon border mechanism ramps up.
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Another flexibility was introduced at member-state level. Denmark’s climate minister Lars Aagaard said the agreed clause allows countries ‘to use high-quality international credits to fulfil up to 5% of their post 2030 targets and efforts’.
Ministers also confirmed that future legislation will incorporate domestic permanent carbon removals into ETS1 to ‘compensate for residual hard-to-abate emissions’.
On the governance side, the Council approved a one-year delay for ETS2, which will now begin in January 2028 for road transport and building heating. Several member states had pushed for a longer postponement, citing concerns about price volatility and social impact. European Commissioner Wopke Hoekstra emphasised that the Commission will still introduce measures ‘to smooth the entry into force of ETS2’, including tools to manage potential price spikes and ensure ‘a predictable price trajectory’.
The meeting also formalised the EU’s updated Nationally Determined Contribution, setting a 66.25-72.5% emissions reduction range for 2035 ahead of submission to the UNFCCC. While the NDC passed with unanimous support, Hungary, Slovakia and Poland opposed the 2040 target and Bulgaria and Belgium abstained.
The focus now shifts to the European Parliament, which must approve the text before it can be written into EU environmental law. The earliest opportunity for a vote is the upcoming 13 November plenary.
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The EU’s 2040 framework makes one thing unmistakably clear: the future of decarbonisation will be built on transparency, high-quality carbon markets, and solutions that deliver real, measurable impact. With international credits now tightly limited and integrity requirements rising, companies are under increasing pressure to choose green initiatives that align with evolving global standards. Green Earth is already operating at this level, developing verified nature-based projects that restore ecosystems, strengthen communities, and produce the kind of high-quality carbon credits regulators are moving toward. For organisations preparing to meet these expectations and contribute to meaningful environmental progress, this is the moment to take the next step—and we’ll guide you from here.
