The EU Climate Law requires the European Commission to propose an intermediate climate target for 2040. The timeline for doing this is defined as ‘’within 6 months of the first global stocktake under the Paris agreement’’, as appropriate. This process was concluded at COP28 in December 2023.
In June 2023, the European Commission's completed its initial public consultation to gather input to the impact assessment for an EU 2040 climate target.
On 6 February 2024, the Commission published a non-legislative 2040 climate target communication, accompanied by an impact assessment, recommending a net greenhouse gas emissions reduction of 90% by 2040, relative to 1990. The Commission's 2025 work programme scheduled the legislative proposal for the first quarter 2025, subsequently pushed to the 2 July 2025.
The legislative proposal to amend the European Climate law to include an intermediate emissions reduction target for 2040 was tabled by the Commission on 2 July 2025. The proposal follows the Commission's recommended 90% reduction target of the 2024 communication.
The Commission included in the proposal text the possible limited contribution (3 % of 1990 EU net emissions) of high-quality international credits under Article 6 of the Paris Agreement, to achieve the 2040 target. The text highlights the role of domestic permanent removals under the EU Emission trading system (ETS) as an aspect to be included in the 2026 EU ETS review ‘’to compensate for residual emissions from hard to abate sectors’’ and also notes enhanced flexibility across sectors.
As committed partners in the energy transition, FuelsEurope fully supports the EU’s climate objectives. However, ambition must be accompanied by pragmatism. Among the others, the EU Emissions Trading System (EU ETS), as a cornerstone of EU climate policy, must remain fit for purpose to effectively support this new target. This requires a regulatory framework that is not only ambitious but also flexible - one that enables innovation, encourages investment, and allows for the scale-up of all viable solutions. Only through such a pragmatic approach can the EU ensure both climate progress and the resilience of its industrial base.
In this regard, FuelsEurope believes that high-quality international credits should be incorporated into the EU’s climate framework beyond the proposed 3% cap and from the start of the post-2030 period: timely inclusion provides regulatory certainty, fosters international partnerships, and enables more cost-effective decarbonisation.
The EU ETS should enable the use of a broad portfolio of solutions, including not only domestic engineered removals, but also domestic nature-based removals and international credits, provided they meet high-integrity standards. Nature-based removals, while not fully fungible with engineered removals, should be eligible for use if they satisfy strict quality requirements.
Such flexibility is vital for scaling up emerging technologies, supporting innovation, and maintaining market functionality as the emissions cap tightens.
Finally, FuelsEurope believes that all sectors under the EU ETS should have equal access to available compliance options. Introducing constraints based on undefined terms such as “residual emissions from hard to abate sectors” risks creating unfair distinctions and regulatory uncertainty. A non-discriminatory, inclusive approach will enhance innovation, strengthen cost-efficiency, and avoid fragmentation among ETS sectors.