On March 5th, the European Union (EU) Council formally adopted the amended European climate law, setting a new target for 2040 to reduce net greenhouse gas emissions by 90% compared to 1990 levels. This goal forms part of the bloc's broader strategy to achieve climate neutrality by 2050. Following the European Parliament’s approval in February (413 votes to 226), the measure now stands as one of the most ambitious medium-term climate frameworks among the world's major economies.
The target is part of the EU Climate Law, the regulatory framework adopted in 2021 that sets mandatory targets for emissions reductions. In addition to the new 2040 target, the EU is maintaining its previous commitment to reducing emissions by 55% by 2030. While the decision was backed by most European governments and legislators, the process also revealed political divisions concerning the costs of the energy transition and its effect on industrial competitiveness.
A new strategy in EU climate policy
This decision marks the final step in the legislative process, following the European Parliament's adoption of its position earlier this year. The EU Council has officially set a binding target to reduce emissions by 90%, which will apply directly in all member states once the regulation is published in the EU Official Journal and enters into force. This target will be used as a benchmark for developing future climate and energy policies after 2030. The European Commission will need to draft additional legislation to ensure the bloc remains on track to achieve net-zero emissions by mid-century. To this end, the Commission will periodically assess scientific, technological, and economic progress in order to adjust policies if necessary.
To achieve the new 2040 target, the regulation introduces certain flexibility mechanisms to allow countries to adapt to the challenges of the energy transition. One of the main elements is the possibility of using high-quality international carbon credits from 2036 onwards. These credits, generated by emissions reduction projects in partner countries, may cover up to 5% of the 1990 baseline for EU net emissions. This means that at least 85% of the reductions must be achieved within European territory.
The regulation also takes into account the use of permanent carbon removal technologies, such as CO₂ capture and storage, to offset residual emissions in sectors that are difficult to decarbonize. This approach aims to address emissions in industries such as steel, cement, aviation, and agriculture, where eliminating emissions entirely is more challenging. In order to achieve these goals, the EU intends to increase investment in clean technologies, including renewable energy, electric vehicles, green hydrogen, and carbon capture solutions. These technologies are considered essential for transforming key sectors of the European economy and reducing dependence on fossil fuels.
Carbon market changes and political challenges
The Emissions Trading System (ETS) is one of the central instruments of European climate policy. Given the new 2040 target, European leaders are calling for adjustments to the ETS to enhance its effectiveness.
According to the draft conclusions of the European Summit scheduled for March, the EU governments intend to request that the European Commission present a proposal for reforming the ETS by July 2026. The purpose of this review would be to reduce carbon price fluctuations and mitigate their impact on electricity costs, which is a growing concern in several member states.
In addition, the full implementation of the Emissions Trading System (ETS) 2, which aims to cover sectors such as road transport and building heating, has been delayed. Initially scheduled to start in 2027, it will now be postponed until 2028. This is due to political pressure and the need to give countries more time to prepare for its implementation.
The approval of the climate target also resulted in political debates among member states. Some countries, including Poland, Hungary, Slovakia, and the Czech Republic, have expressed concerns about the economic impact of the green transition. These countries, whose economies are more dependent on carbon-intensive industries, fear that the investment costs necessary to meet climate targets will affect their competitiveness and industrial sectors.
The final agreement demonstrates a political commitment to balancing climate action, energy security, and industrial competitiveness. The new 2040 target is a significant milestone in the European Union's climate planning, as it strengthens the bloc's international credibility and provides a clear framework for achieving a net-zero economy by mid-century.
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