The European Commission is preparing to release a new draft amendment to the European Climate Law that would allow the limited use of carbon credits to help meet the EU’s 2040 climate target. This proposal sets a goal of reducing greenhouse gas emissions by 90 percent compared to 1990 levels by 2040. However, unlike previous climate policies that focused exclusively on domestic efforts, this draft would permit a small portion of emissions reductions to be achieved through climate projects in non-EU countries, primarily in the developing world.
This shift introduces the option for member states, companies, or the EU itself to pay for emissions-reduction initiatives abroad—such as building renewable energy infrastructure or preserving carbon-absorbing ecosystems—and apply those results toward their own climate targets. These carbon credits would essentially allow entities to offset a portion of their domestic emissions by financing equivalent reductions elsewhere.
A key element of the draft is the proposed cap: only 3 percentage points of the 90 percent target could be fulfilled using carbon credits. This figure mirrors a compromise reached during the formation of Germany’s ruling coalition and was reportedly discussed by EU Climate Commissioner Wopke Hoekstra in talks with various member states. However, the figure remains a point of contention. While some countries, like Germany, prefer a conservative cap to maintain pressure for domestic reductions, others, including France, argue that a more flexible limit—possibly higher than 3 percent—would better reflect economic realities and allow industries room to adapt.
Supporters of the measure argue that carbon credits provide a flexible, cost-effective tool to meet ambitious climate goals. France, for example, sees international offsets as a way to reduce the burden on its industries while responding to domestic challenges, such as declining forest carbon sinks caused by drought, pests, and climate stress. Finland has voiced similar concerns, noting that overharvesting and climate impacts have turned its forests into carbon sources rather than sinks. With Finland becoming the tenth EU country to support the use of international offsets, momentum is building for their inclusion.
However, critics warn that incorporating carbon credits into EU climate law could weaken the credibility and environmental integrity of its targets. The EU’s independent scientific advisory board has raised concerns that relying on offsets—rather than cutting emissions at the source—could slow down genuine decarbonization. Vice President Teresa Ribera has also expressed skepticism, emphasizing the need for real and measurable domestic reductions.
There is also debate over what types of projects should generate credits. France favors nature-based solutions like reforestation, but Germany insists on “permanent” emissions reductions, such as those achieved through technological upgrades or clean energy transitions. This reflects deeper disagreements about the quality, permanence, and verification of offset projects.
The final proposal, expected on July 2, will have significant implications for how the EU approaches its 2040 target. While carbon credits are intended as a last-resort option, growing political pressure suggests they may become a permanent, if limited, part of the EU’s climate strategy.