Getting 2040 right: managing flexibilities to safeguard Europe’s climate ambition
For Europe’s 2040 climate target, the headline sets the right direction – but its delivery will depend on the fine print. To ensure that “flexibilities” support climate action, strict limits and stringent quality criteria are necessary. A dedicated reserve to manage them would help preserve the integrity of Europe’s climate policy architecture.
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Benjamin Görlach
In 2021, the European Union adopted its landmark Climate Law, which sets a legally binding target for the bloc to be climate neutral by 2050, in line with its earlier international commitments. In addition to this long-term goal, the law also foresees that greenhouse gas emissions should be at least 55 percent below 1990 levels by 2030 and mandates the EU to set an intermediate target for 2040.
The European Commission proposed such a target in July 2025 at 90 percent – which is at the lower end of the recommendation of its scientific advisors, the European Scientific Adisory Board on Climate Change. In November, EU governments backed this headline target. However, they also weakened it by increasing the share of international credits as a form of “flexibility” from the proposed 3 to 5 percent of 2040 emission reductions. The European Parliament echoed this, but also specified several safeguards and quality criteria that international credits should meet.
An upcoming Agora paper will propose options to manage these flexibilities thereby ensuring that they align with the EU’s climate framework, aimed at reducing emissions by 90 percent. In this article, we offer a sneak peek of our forthcoming proposal.
Where the EU stands on emission reductions
According to European Environment Agency (EEA) data, in 2024, net greenhouse gas emissions in the EU were 37 percent below 1990 levels. For 2030, Member States are still 8 percentage points short of the collective target: the EEA projects that if all currently adopted policies and measures are fully implemented, the EU’s emissions in 2030 will be 47 percent below 1990 levels.
The good news, however, is that if the EU fully implements all measures now in the pipeline, it gets to 54 percent in 2030 – just 1 percentage point off the target. This underlines the assessment shared by the scientific advisory body that a 90 percent reduction by 2040 is fully feasible (European Scientific Adisory Board on Climate Change).
How to get to 90 percent?
The 2040 “flexibility” controversy
While the EU’s headline 2040 climate target has enjoyed broad support, controversy has been sparked by how much, and which, flexibilities the EU should allow itself to achieve it.
Two types of flexibilities are at the core of the debate:
- The recognition of carbon dioxide removed from the atmosphere and permanently stored to generate emission credits, and
- The use of international credits generated and accounted for under Article 6 of the Paris Agreement.
There is also an area of overlap between the two: going forward, world regions with more abundant renewable and/or land resources and favourable conditions for permanent storage may provide carbon removal as a service, selling credits to emitters in other geographies – including the EU.
Used excessively and with insufficient standards, flexibilities risk becoming loopholes, undermining the clarity and predictability that the EU climate framework provides for investors and market participants. Paying for climate projects in third countries also diverts resources from the EU’s own decarbonisation and economic modernisation. This at a time when the global cleantech race intensifies and the EU faces pressing investment needs in its economy and infrastructure.
Yet carefully designed flexibilities can complement EU climate policies, if they remain limited in quantity, conform with high standards and are used in a targeted way. To this end, the following conditions are critical:
- Removals, particularly if used in the EU carbon market (EU ETS), must ensure permanent storage, with stored amounts accurately measured and verified. In practice, Direct Air Capture or bioenergy combined with carbon capture and storage (DACCS and BECCS) meet these criteria.
- International credits should be sourced from partner countries with comparable ambition and credible climate policies. In other instances, EU demand for credits can help to unlock additional ambition as part of bilateral partnerships or alliances.
- International credits should primarily compensate non-ETS emissions when they result from droughts, wildfires or storms - defined as “natural disturbances“ in the EU law on land use and forestry (LULUCF).
Furthermore, a clear limit for using international credits is critical as it helps ensure they complement, rather than substitute, domestic action. Raising the initially proposed 3 percent limit to 5 percent for international credits increases the risk that domestic action will be delayed. It also increases the difficulty of sourcing sufficient high-quality credits: potential supplier countries will themselves be in a period of rapidly reducing emissions, meaning they may have little excess reductions to sell in the form of credits. It is thus all the more important to adhere to strict criteria when resorting to their use.
A possible mechanism to manage flexibilities
A dedicated flexibilities reserve to safeguard EU climate architecture’s integrity
To help align supply and demand, frontload investment in removals technologies and safeguard the integrity of the EU climate architecture, we propose to manage flexibilities through a dedicated reserve.
For international credits to compensate surges in land use emissions as a result of natural disturbances, such a buffer can address the spatial and temporal uncertainty of these events. For removal credits, a reserve combined with a purchasing mechanism can frontload and secure demand. In this way, supply will be available when it is most needed – in the late 2030s and beyond.
Frontloading demand for permanent removals can also accelerate technological scaling and market development. At the same time, a strategic approach to international credits – using EU demand to support the transformation in partner countries and lock in additional climate commitments – leverages climate ambition abroad. Clear framework conditions, such as qualitative criteria and quantitative limits, are necessary to provide clarity for investors and policymakers.
As Europe sets its 2040 course, it is essential to set clear guardrails for the use of flexibilities and commit to a policy architecture that ensures climate ambition, provides clear long-term signals where possible and allows flexibility where needed.