EU Climate Target 2040: Assessment of the Council Proposal

On 5 November, the European Council presented its proposal for the EU climate target for 2040 and for the revision of the EU Climate Law. As in the European Commission's proposal, European countries are to reduce their net greenhouse gas emissions by 90 per cent by 2040 compared to 1990 levels, but the amount of international carbon credits to achieve the 2040`s target will be significantly increased. This is a key milestone on the EU’s path to achieving climate neutrality by 2050.

At the same time, however, the proposal includes “flexibilities” that, according to analyses by Oeko-Institut, could weaken the impact of real emission reductions. For example, there is no mechanism to ensure that the 90 per cent target is achieved if fewer international credits than planned are used. In addition, the target can be adjusted if natural sinks fall short of expectations or if other sectors do not achieve sufficient emission reductions.

Oeko-Institut examines the European Council's proposal in an analysis entitled ‘The EU's 2040 climate target – Assessment of the proposal by the European Council’. This analysis is based on the policy brief ‘The proposed 2040 climate target for the EU’ from July 2025, which examines the European Commission's proposal.

Key findings at a glance:

• International carbon credits: The European Council’s proposal goes beyond that of the European Commission. The proposal allows for the use of international carbon credits equivalent to five percentage points of 1990 net emissions. According to the analysis, this flexibility could result in a 50 percent increase in net emissions in 2040. Gross emissions – those not accounting for CO₂ removals – would then be only 79 percent below 1990 levels. In addition, the Council proposes to include international credits in national targets, meaning that almost one quarter of all international credits could be used to meet national objectives.
• Land use, land-use change and forestry (LULUCF) emissions: The inclusion of this sector in the 2040 target is unbalanced. Surpluses can be credited to other sectors, thereby reducing their climate ambition. Conversely, deficits in this sector could lead to higher net emissions, as the overall target could be adjusted downward.
• Postponement of the EU Emissions Trading System II (ETS 2): Postponing the ETS 2 by one year would lead to a higher initial carbon price in 2028 because the cap value for that year remains unchanged. Moreover, around €50 billion in auction revenues would be lost and the Social Climate Fund (SCF) would be reduced by about 16 percent. This would weaken support for vulnerable groups. To safeguard social fairness and credibility, it is essential to maintain the current SCF level of €65 billion.

Policy Brief „The EU's 2040 climate target – Assessment of the proposal by the EU Council“ (update 7.11.2025)

Policy Brief „The EU's 2040 climate target – Assessment of the proposal by the EU Commission“ (2.7.2025)

News “EU Climate Target 2040: Assessment of the Commission Proposal” from 3th July 2025