The European Parliament voted on the EU’s 2040 climate target on November 13. Following intense debate and several last-minute amendments, MEPs seemed to have endorsed the compromise text adopted by the ENVI Committee earlier in the week. Hence, EUA Dec-25 prices seemed not to have any reaction to the positive vote outcome.
The Parliament’s position largely aligns with the Council’s agreement from 5 November. The key elements of the agreement are as follows:
- 2040 Emissions Target:
A legally binding goal to reduce net greenhouse gas emissions by 90% by 2040 compared with 1990 levels. An amendment proposed by some EPP members to lower the target to 83% failed to gain sufficient support. - Use of International Carbon Credits:
Member States may use up to 5% of international carbon credits to meet their targets between 2036 and 2040 - an increase from the Commission’s original 3% proposal. However, the ENVI and Parliament compromise explicitly states that “international credits should not play a role in compliance within the EU ETS.” - Delay of EU ETS 2 Launch:
The start of the new EU ETS 2 carbon market for road transport and buildings will be postponed by one year, to 2028. - Inclusion of Domestic Permanent Removals:
The Parliament supports including domestic permanent removals in the EU ETS, suggesting that only BioCCS and DACCS technologies would qualify. The text refers to “the role of domestic permanent removals (such as Biogenic emissions Capture with Carbon Storage (BioCCS) and Direct Air Capture with Carbon Storage (DACCS)) in the EU ETS while ensuring environmental integrity.” - Revision of the EU ETS Cap Post-2039:
The current EU ETS cap may be revised to allow some emissions beyond 2039. This suggests a lower Linear Reduction Factor (LRF) after 2030, since the current 4.4% rate (from 2028) would lead to a complete phase-out by 2039.
The ENVI compromise also requests that the Commission consider “a slower phase-out pathway for free allocation of allowances from 2028 onwards” to support decarbonisation, investment, and employment, potentially involving the Industrial Decarbonisation Bank and a review of the Market Stability Reserve. It is unclear whether these changes will be addressed in the 2026 EU ETS Review, as they were not included in the initial consultation text. - Biannual Review of the 2040 Target:
The Commission will review and report biennially on progress toward the 2040 target, assessing implementation, intermediate milestones, and technological or competitiveness developments. While the impact on the EU ETS remains uncertain, any changes would require a full legislative process.
Next Steps
Parliament and the Council will now begin trilogue negotiations, followed by final votes before the regulation is adopted and published in the EU Official Journal. Given the strong alignment between both institutions’ positions, ClearBlue expects the process to proceed smoothly, with final agreement likely by the end of the year,
ClearBlue Markets will continue to closely monitor upcoming discussions and keep clients informed of any key developments.