European Commission proposes carbon credits for 2040 climate target

The European Commission has put forward a proposal allowing carbon credits purchased from developing countries to be counted towards the European Union’s 2040 climate target for the first time. The move, announced on Wednesday, has drawn criticism from campaigners and some scientists.

What are Carbon Credits?

Carbon credits, or offsets, involve funding projects abroad that reduce CO2 emissions as an alternative to cutting emissions domestically. Examples include forest restoration in Brazil or replacing petrol buses with electric ones in cities. The emission reductions achieved by these projects generate 'credits' that buyers can count towards their climate goals, while sellers receive funding for their green initiatives.

Supporters argue the system provides essential financing for climate efforts in developing nations and fosters international cooperation. However, the reputation of carbon credits has suffered due to several scandals where projects failed to deliver the promised environmental benefits.

Why is the EU Buying Them?

The European Commission proposes allowing up to 3% of the EU’s 2040 target — which aims for a 90% reduction in net emissions from 1990 levels — to be met through carbon credits bought from other countries. Currently, EU climate goals require emissions reductions to be achieved domestically.

The proposal comes amid geopolitical tensions and economic challenges across Europe, with countries like Germany and Poland pushing for a less stringent target. The Commission aims to maintain the ambitious 90% reduction while easing the domestic burden by incorporating carbon credits.

The EU member states and the European Parliament must still negotiate and approve the final target.

Risks and Concerns

While countries such as Germany welcome the use of carbon credits and project developers view it as a boost for climate finance, environmental campaigners warn the EU may be shirking its responsibility to cut emissions at home and relying on cheap, low-quality credits.

EU climate science advisors have also opposed the use of credits under the 2040 target, fearing it could divert investment away from local clean energy industries. The EU previously banned international credits in its carbon market after an influx of cheap, low-impact credits caused a crash in carbon prices.

To mitigate risks, the Commission intends to buy credits in line with global market rules and quality standards for carbon trading currently being developed by the United Nations. Brussels will also propose specific quality standards for the carbon credits the EU purchases next year.

What Will It Cost?

Prices for carbon credits vary widely, ranging from a few dollars per tonne of CO2 to more than a $100 depending on the project. To cover 3% of the EU’s 2040 target, roughly 140 million tonnes of CO2 credits would be needed — equivalent to the total emissions of the Netherlands last year.

A senior Commission official emphasised the EU’s determination to avoid purchasing cheap, low-integrity credits.

“The credits currently available on voluntary carbon markets are very inexpensive, likely reflecting a lack of strong environmental integrity,” the official said.

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