EU's 2040 climate target brings back welcome dose of pragmatism and flexibility
Europe's 2040 target is the key missing piece in the EU's decarbonisation pathway toward its mid-century net-zero goal. However, the Commission has emphasised that the policies to achieve this target must differ from those designed to deliver the climate goal of at least a 55% net GHG reduction by 2030 - calling for more pragmatism and greater flexibility.
The Commission's suggested target includes a quota of 3% of the target that can be met through the use of international carbon credits generated under Article 6 of the Paris Agreement.
The proposal heralds a new era of market-based cooperation under Article 6, by offering companies the 'flexibility' to deliver emissions reductions and removals where they are most cost-effective.
IETA welcomes this pragmatic move by the Commission to link the EU ETS with the wider international carbon marketplace. European policymakers have long been sceptical about allowing international credits into EU carbon markets, often citing the EU's 'negative experience with CDM credits.'
This reluctance harks back to the period from 2008 to 2020, when the EU allowed the use of credits issued under the Clean Development Mechanism (CDM) to meet a limited portion of the emission reductions required by EU ETS compliance entities.
Unfortunately, CDM credits entered the EU's carbon market just as the 2008-9 global financial crisis hit, creating a perfect storm of decreasing demand and increasing supply in the EU ETS. Additionally, CDM credits were not without controversy concerning their environmental integrity, forcing the EU to introduce bans on certain types of projects entering the EU ETS.
Today, however, international credits are very different from what they were 15 years ago. Article 6 now provides a global framework for international carbon market collaboration, and the nascent Paris Agreement Crediting Mechanism (PACM) is delivering standardised rules and improved governance.
Credits generated under Article 6 represent a significant shift from the CDM era; they are subject to more stringent methodologies, mandatory safeguards, and corresponding adjustments to ensure high environmental integrity and to prevent double counting of emission reductions.
And while the PACM is still being operationalised, a clear demand signal from the EU is precisely what the emerging global carbon market needs.
Engagement with international credits and enhanced inter-sectoral flexibilities have the potential to ease the cost of the EU's low-carbon transition, especially for hard-to-abate sectors. In this context, the role of Article 6 credits should not be limited to supporting mitigation efforts in land-based and forestry sectors.
While IETA applauds the proposal to recognise permanent carbon removals under the EU ETS - as this can help boost market liquidity and reduce price volatility - the next step should be to integrate international carbon credits removal into the EU's carbon market, starting with removals generated under the Paris Agreement Crediting Mechanism. Naturally, all eligible removals must meet high-quality criteria, with credible safeguards on permanence and reversal risk.
But maintaining market stability and the effective functioning of the EU ETS must remain a priority. The EU should be able to set guardrails to guarantee the quality of imported credits and to control their quantity and market impact. The same principle should apply to the integration of domestic removals - their interaction with EU and Member State policies and impact on carbon market functioning should be closely monitored.
We urge Member States and the European Parliament to support enhanced flexibilities and the role for Article 6 credits in the 2040 climate package. We acknowledge that agreeing specific rules for market-based cooperation and integration of removals into the EU ETS will take time.
The legislative package is expected next summer, followed by months - or years - of negotiations with co-legislators. Still, the proposal for the 2040 target deserves a swift endorsement, to provide business with stability and long-term predictability. That should be followed by in-depth analysis to determine whether the proposed flexibilities are sufficient.
The Commission proposal represents a strong vote of confidence in international carbon markets, which is all the more significant after the EU's chastening experience with carbon credits in the 2008-2020 period. It also highlights the immense efforts of stakeholders around the world to increase the reliability and integrity of carbon reductions.
Julia Michalak is the EU Policy Director at IETA and, Andrea Bonzanni is the International Policy Director at IETA.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Euractiv
2 hours ago
- Euractiv
UK, Norway and Ukraine welcome to join EU's IRIS² space programme, says commissioner
Non-EU countries such as Norway, Ukraine and the United Kingdom could yet join the EU's secure communication satellite network IRIS² as an alternative to Elon Musk's Starlink, Defence and Space Commissioner Andrius Kubilius told Euractiv. Aside from Norway, which is already in talks with the European Commission over joining the satellite network programme, neither Ukraine nor the United Kingdom have so far kicked off negotiations about signing up. However, Ukraine has relied on Musk's SpaceX to provide telecommunications services for its military operations during its war against invading Russian forces, and there has been general disquiet about the level of dominance the Starlink constellation has in the space-enabled telecom market. That offers IRIS² – which is expected to cost €10.6 billion and be made up of around 280 satellites once it's online in the 2030s – an opportunity to snag market share. 'I would not be opposed," Kubilius said when asked if such non-EU countries could formally join the multi-billion euro space programme. The United Kingdom has a strong track record in space, while Ukraine holds significant potential having served as a key space hub during the Soviet era, Kubilius said. Iceland – also a European Economic Area country like Norway – said it had concluded talks with the Commission earlier this month to participate in IRIS². Kubilius was speaking just weeks after presenting a draft EU Space Act, which was tabled by the Commission on 25 June and sparked intense behind-the-scenes negotiations over the scope of the rules. While the legislation will take years to finalise, the provisions could in future hamper the likes of Musk's SpaceX from accessing EU consumers with its satellite services. However, Kubilius said there hasn't been any blowback to the draft so far. "For the time being, I received no hints that the Americans will react on the EU Space Act," said Kubilius, who had just returned from a US trip from July 17 to 22. (nl, jp)
Euractiv
12 hours ago
- Euractiv
Von der Leyen secures trade deal with Trump to avoid 30% US tariff on EU goods
The EU and the US clinched a long-awaited trade deal on Sunday, averting the imposition of a 30% US blanket tariff next month that threatened to upend the €1.7 trillion transatlantic trade relationship. The agreement came after a face-to-face meeting between European Commission chief Ursula von der Leyen and US President Donald Trump in Scotland. The news caps months of increasingly frantic efforts by EU leaders to negotiate down Trump's sweeping levies, which have transformed global supply chains and exacerbated Europe's deepening economic malaise. Trump has imposed a 50% tariff on steel and aluminium, a 25% duty on cars and car parts, and a 10% blanket levy on most other EU exports that affect around €370 billion worth of EU goods, or 70% of the bloc's exports to the US. The duties come on top of the 4.8% average rate faced by EU exporters prior to Trump's return to the White House in January. Over the past week EU capitals have become increasingly hopeful that Brussels could strike deal similar to the one Washington signed off on last week with Japan, which left a 15% blanket levy in place for cars and most other goods, although not for steel and aluminium. EU exporters will face a 15% blanket tariff, Trump said following the meeting – down from the current 10% levy. Brussels will also purchase $750 billion worth of US energy and invest $600 billion into America 'over and above' what it has already promised, he said. The bloc will also buy 'vast amount of [American] military equipment', he added. Trump also said the EU will 'open up' its markets to allow US exports to enter the bloc at a 'zero tariff' rate. This is a developing story and the text has been updated. (jp)
Euractiv
14 hours ago
- Euractiv
Commission chief urges Zelenskyy to ‘preserve' independence of anti-corruption bodies
European Commission President Ursula von der Leyen on Sunday urged Ukrainian President Volodymyr Zelenskyy to safeguard the independence of two key anti-corruption bodies, after a bill that would have placed them under presidential control sparked heavy backlash. Ukraine must " preserve independent anti-corruption bodies, which are cornerstones of Ukraine's rule of law," v on der Leyen wrote on X following her conversation with the Ukrainian leader. The warning comes after Ukraine's parliament on Tuesday approved amendments to a bill that would have placed two Ukrainian anti-corruption agencies under the supervision of the prosecutor general, who is appointed by the president. These changes have sparked domestic protests and drawn criticism from key allies, including European leaders. In a statement on Wednesday, the Commission said von der Leyen had "strong concerns" about the legislation. By Thursday, Zelenskyy had announced a reversal of the proposed changes, after thousands took to the streets in protest. The rule of law and independence of these bodies are central to the country's accession to the EU. "Rule of Law remains in the very center of EU accession negotiations" Enlargement Commissioner Marta Kos wrote on X following Tuesday's parliamentary vote. French President Emmanuel Macron also weighed in a post on X on Sunday, stressing the importance of safeguarding the independence of both bodies as a key step toward Ukraine's EU accession. Ukraine has " achieved a lot on its European path" von der Leyen added. "It must build on these solid foundations." (de)
