EU to add global CO2 credits to climate goal as heatwave continues

The European Commission on Wednesday proposed an EU climate target for 2040 that for the first time will allow countries to use carbon credits from developing nations to meet a limited share of their emissions goal.

The European Union executive proposed a legally-binding target to cut net greenhouse gas emissions by 90 percent by 2040, from 1990 levels - with the aim of keeping the EU on course for its core climate aim to reach net zero emissions by 2050.

But following opposition from governments including France, Germany, Italy, Poland and Czechia, the Commission also proposed flexibilities that would soften the 90 percent emissions target for European industries.

The EU has among the most ambitious climate targets of any major economy. So far, EU emissions targets have been based entirely on domestic emissions cuts.

Reflecting Germany's public stance, up to 3 percentage points of the 2040 target can be covered by carbon credits bought from other countries through a UN-backed market, reducing the effort required by domestic industries.

The carbon credits would be phased in from 2036, and the EU will propose legislation next year to establish rules on what quality standards the credits must meet and who would buy them.

EU climate commissioner Wopke Hoekstra said the new climate target would create investment certainty for industries and governments - and that buying foreign carbon credits could aid EU diplomacy with other countries.

"We are staying the course on the clean transition. We know why we're doing it - for economic, security and geopolitical reasons," Hoekstra said in a statement.

Countries would also get more flexibility on choosing which sectors in their economy contribute most towards the 2040 goal.

Tensions

Climate change has made Europe the world's fastest warming continent and a severe heatwave this week has caused wildfires and disruption across the continent, but Europe's ambitious policies to combat temperature rise have stoked tensions within the 27-member bloc.

While the European Commission has pitched its climate agenda as a way to improve Europe's competitiveness and security, some governments and lawmakers say industries reeling from U.S. tariffs and high energy costs cannot afford tougher emissions rules.

The EU's climate science advisers had warned against counting credits towards the 2040 target, and said spending money on foreign carbon credits would divert investments from local industries.

Carbon credits are generated by projects that reduce CO2 emissions abroad - for example, forest restoration in Brazil, and raise funds for such projects. However, investigations have shown some credits failed to deliver the environmental benefits they claimed.

EU countries and lawmakers must negotiate and approve the 2040 goal. That lawmaking process can take years, but the EU faces a deadline of mid-September to submit a new 2035 climate target to the UN - which the Commission has said should be derived from the 2040 goal.