EU Backs 90% Emissions Cut by 2040 and Delays ETS2 Rollout

The EU Parliament votes in favor of a binding 90% emissions reduction target by 2040. It also gives the green light to the postponement of the ETS2, the CO2 emissions trading system extended to the road transport and building heating sectors.

With 413 votes in favour, 226 against and 12 abstentions, the European Parliament definitively approved the amendments to the European Climate Law, which set a new binding interim target: a 90% reduction in net greenhouse gas emissions by 2040 compared to 1990 levels.

The green light follows a political agreement with the Council of the European Union, which introduced a series of flexibilities to make the new target achievable, also in light of concerns expressed by some member states about economic competitiveness and the costs of the green transition.

The vote also saw the postponement by one year of ETS2 , the new emissions trading system that will extend the price of carbon to road transport fuels and the heating of buildings.

The amendments to the Climate Law will now need to be formally approved by the Council. The regulation will enter into force 20 days after its publication in the Official Journal of the European Union.

The evolution of the 2021 Climate Law

The European Climate Law, adopted in 2021, made the objective of climate neutrality by 2050 legally binding , also setting an intermediate target of at least 55% reduction in emissions by 2030.

According to a recent update from the European Commission, the Union is almost on track to meet its 2030 target: by the end of 2023, emissions had already decreased by 37% compared to 1990.

In July 2025, the Commission proposed amending the legislation by introducing a new 90% target by 2040 and allowing the limited use of international carbon credits under Article 6 of the Paris Agreement.

The flexibilities introduced: more space for carbon credits

The agreement reached between Parliament and the Council expands the role of carbon markets compared to the initial proposal.

International credits up to 5%

From 2036 , up to five percentage points of the reductions can come from high-quality international carbon credits (two points more than the 3% initially proposed).

This means that the EU will still have to achieve an effective domestic reduction of 85% by 2040.

Credits may:

Come only from countries with climate policies aligned with the goals of the Paris Agreement
Be used exclusively for emissions not covered by the European ETS

Permanent carbon removals

The text also allows for the use of permanent CO₂ removals to offset hard-to-abate emissions in sectors covered by the ETS, increasing flexibility across instruments and sectors.

ETS2: What it is and what changes with the postponement to 2028

The vote also confirmed the postponement of ETS2 from 2027 to 2028.

ETS2 is the extension of the European Emissions Trading System (ETS) to new sectors previously excluded from carbon pricing, namely:

Road transport
Buildings (combustion of fuels for heating)
The goal is to incentivize emissions reductions in these sectors as well, pushing for more efficient solutions and clean technologies.

The approved text also introduced further flexibilities , allowing Member States to compensate for any imbalances between sectors in achieving climate objectives, to avoid excessive impacts on families and businesses.

Biennial review of the 2040 target

Another key element of the agreement is the biennial assessment of progress towards the 2040 target.

The Commission will have to take into account updated scientific data, technological developments, energy prices and the impact on households and businesses, the level of net removals and the EU’s international competitiveness.

If necessary, it may propose a revision of the legislation, including modifying the 2040 target or introducing additional measures to protect competitiveness and social cohesion.

A balance between climate ambition and competitiveness

The new 90% target represents one of the most ambitious climate goals globally. However, the introduction of flexibility mechanisms, the periodic review, and the postponement of ETS2 signal the EU’s desire to maintain a balance between ecological transition, economic stability, and industrial competitiveness .

2040 thus becomes the crucial stage towards climate neutrality by 2050, with a trajectory that can be adjusted based on technological, energy, and economic developments in the coming years.

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(Featured image by Lukas S via Unsplash)

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