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EU climate ministers agreed on a 2040 target that includes flexibilities weakening the bloc’s 90% emissions-reduction goal. (Photo: iStock)
After months of delay, European Union climate ministers agreed on Wednesday to a 2040 climate target that includes flexibilities, weakening the bloc’s 90% emissions reduction goal. The deal also postpones the start of the EU Emissions Trading System for buildings and road transport (ETS2) to 2028.
"We don't want to destroy the economy. We don't want to destroy the climate. We want to save both at the same time," Polish Deputy Climate Minister Krzysztof Bolesta said on Tuesday.
Flexibilities and 5% foreign offsets could raise emissions by 50%
EU countries agreed to cut emissions by 90% by 2040, compared to 1990 levels, but the deal includes three “flexibilities” that could weaken real emission reductions.
First, member states will be allowed to use foreign carbon credits for up to 5 percent of their target from 2036 onward, an increase from the 3 percent proposed earlier this year, following a pilot phase between 2031 and 2035. Second, domestic permanent carbon removals under the EU ETS can be used to offset residual, hard-to-abate emissions. Third, member states may apply “enhanced flexibility” within and across sectors, allowing shortfalls in one area to be balanced out elsewhere.
“These flexibilities let major polluters off the hook, undermining the ‘polluter pays’ principle enshrined in EU law,” said Khaled Diab, communications director at Carbon Market Watch.
According to Carbon Market Watch, the 5% offset allowance could cost up to USD 56.3 billion and result in EU emissions being 50% higher than under a fully domestic target, even assuming a conservative carbon credit price of USD 80.5.
The deal also introduces a biennial progress review to assess net removals at the EU level against what is needed to meet the 2040 goal. The review findings could allow the target to be adjusted downward, further weakening the bloc’s climate ambition.
ETS2 delay weakens plan to cover 75% of EU emissions
The EU Emissions Trading System for buildings and road transport (ETS2) has been postponed to 2028. The original ETS already covers heavy industry, energy, shipping and aviation, and has helped cut emissions by 47% over 18 years, mainly in the energy sector. Once implemented, ETS2 would expand carbon pricing to cover about 75% of the EU’s total emissions.
Postponed to 2028, the EU ETS for buildings and road transport (ETS2) would have extended carbon pricing to about 75 percent of the bloc’s total emissions, together with the existing ETS. (Photo: iStock)
Concerns about the social impact of extending carbon pricing to households and road transport led to the creation of the Social Climate Fund, which will provide more than USD 98.9 billion, including member state co-financing, to support vulnerable households through direct investment and income aid.
To limit price volatility, a soft cap of USD 51.8 per tonne of CO₂ was introduced, along with a 30% increase in emission allowances in the first year of implementation, and mechanisms to release additional permits if prices rise sharply.
Beyond the Social Climate Fund, ETS2 is expected to generate at least USD 299 billion in climate financing for member states based on the soft price cap. With these instruments already in place, the sudden decision to delay implementation has drawn criticism from experts, who warn it undermines market confidence and weakens the EU’s overall climate effort.
“Climate skeptic countries got their wish list of loopholes approved. The damage done to the EU’s credibility in the international arena, and to the trust of its citizens demanding climate action is substantial.” said Wijnand Stoefs, EU policy lead at Carbon Market Watch.
Source: Reuters (1) (2), Carbon Market Watch (1) (2)
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