The EU Parliament Environment Committee January 11 2026 voted for the #Breakthrough Agreement in EU Climate Policy, adopted in the November 5 2025 Environment Council meeting. Additional #flexibilities ensure meeting the ambitious climate EU 90% target for 2040, boosting carbon removals, partly through the use of Article 6 Paris Agreement carbon credits, also at lower cost and with global impact. The EP Plenary is expected to vote on the agreement Febr 8-12.
With the new climate deal, emissions are not leaving the EU, but additional reductions and removals come in
What are the agreed areas of flexibility that will be elaborated:
- The possibility to use high-quality international carbon credits (Artice 6) to make an ‘adequate contribution’ towards the 2040 target, quantified as up to 5% of 1990 EU net emissions, from 2036 onward. To be elaborated:”The origin, quality criteria and other conditions concerning the acquisition and use of any such credits shall be regulated in Union law”.
- A pilot period with Art 6 carbon credits for the period 2031-2035 “to initiate a high-quality and high-integrity international credit market”
- The EU emissions trading system (ETS) will be linked to domestic permanent carbon removals to “compensate for residual hard-to-abate emissions”, via the Carbon Removal Certification Framework (CRCF)
- It says in the recital that the current EU ETS trajectory should be revised in the upcoming review, that would allow for a limited amount of emissions after 2039.
- And the Commission should for the CBAM sectors in particular timely consider a slower phase-out pathway for free allocation of ETS allowances from 2028 onward, while minimising the risk of carbon leakage.
- Enhanced flexibility within and across sectors and instruments to support the attainment of targets in simple and cost-effective ways, allowing member states to address shortfalls in one sector without compromising overall progress.
Expected flexibilities to the CBAM as follow-up
- Regarding CBAM border carbon pricing itself: I expect that when Art. 6 credits are directly or indirectly linked to the ETS CO2 budget, importers of CBAM goods could also surrender Art. 6 credits.
- For importer countries that have a carbon tax or ETS, that allow Art 6 credit partly as offset, those commensurate emission reductions or removals could then be subtracted. Singapore is requesting that
- Delay CBAM for fertilizer import. The Commission a proposes new Article 27a, allowing temporarily removing products from CBAM where there is clear evidence it causes severe harm to EU internal market due to serious and unforeseen price impact. European farmers are already facing high fertilizer import cost, that will increase with the CBAM tariff. After adoption fertilizers can be temporary exempt from CBAM. The EU fertilizer industry fears loosing competition. But to compensate this, delaying the phase-out of free permits is an option. Potentially that will also be appropriate for other goods. A CBAM tariff can also be applied with free allowances. The WTO just requires that trading partners are treated the same.
Remaining emissions by 2040 can be compensated by exchanging a portion of purchased CRCF removals and Art 6 credits into EU allowances
Residual emissions
So the EU domestic reduction of net greenhouse gas emissions in 2040 will be by 85%. The additional limited amount of emissions after 2039 for ETS sectors cannot refer to just printing additional allowances, because that would endanger meeting the climate neutral target. Remaining emissions by 2040 emissions can for example be compensated by exchanging a portion of purchased CRCF removals and Art 6 credits into allowances. These can the be stored into the Market Reserve and be auctioned accordingly.
The EU also introduces a biennial assessment to track progress towards intermediate targets based on the latest scientific evidence, technological advances and the EU’s global competitiveness. If member states then need additional carbon credits they can use the:“flexibility for Member States to use high-quality international credits to fulfill up to 5% of their post-2030 targets and efforts”, likely to contribute to their ESR/LULUCF targets.
Commissioner Wopke Hoekstra:”We have agreed to a legally binding headline 2040 target of 90% with a domestic target of 85% and up to 5% of international carbon credits”
If the EU and its member states finance the 5% credits in an #organised, #bilateral way, via Art 6.2 arrangements and put the transferred ITMOs a reserve, as resource for future input for the MSR later, the EU can best control the quality of the credits, and the price of ITMOs.
2035 NDC target
The future use of Art 6 carbon credits is also already mentioned in the agreed NDC for 2035, the EU brought to CoP30 in Brazil. That includes a target within the range between 66.25 and 72.5% in GHG emissions by 2035.
Automotive Package
Flexibility is also proposed by the Commission in December 2025 for the new car fleet in 2035 compared to 2021: 90% of the new fleet should be without combustion. 10% of new vehicles could still feature conventional, albeit highly efficient, combustion engines. Remaining emissions must be mitigated through the use of carbon-neutral e-fuels or the use of low-carbon steel in manufacturing.
