The European Commission proposed an amendment to the European Climate Law, setting a 2040 target of a 90% reduction in net greenhouse gas emissions from the 1990 level. The outlined measures would give certainty to investors, promote innovation and business competitiveness and increase energy security, according to the European Union’s executive body.

The EU is closing in on its 2030 goal to slash annual net emissions by 55% from the 1990 baseline, according to the European Commission’s recent report on national energy and climate plans (NECPs). It is part of the efforts to reach climate neutrality by mid-century. Today the EU’s top executive body formally outlined the proposal for the next intermediate target – 90% by 2040.

It is in the form of an amendment to the European Climate Law, which entered into force in July 2021. In the meantime, the 27-member bloc adopted a 2030 legislative package known as Fit for 55.

The European Parliament and the Council of the EU now need to discuss and adopt the amendment.

Nature-based and industrial carbon removals will play an increasingly important role in reaching the targets, the European Commission pointed out. It implies domestic permanent carbon removals within the Emissions Trading System (EU ETS) to compensate for residual emissions from hard-to-abate sectors. Such systems need to scale up significantly by 2040, the commissioners said.

More pragmatic, flexible trajectory toward 90% reduction in emissions by 2040

The proposal sets out a more pragmatic and flexible way to reach the milestone, the European Commission claimed.

“Aligned with the EU Competitiveness Compass, Clean Industrial Deal and Affordable Energy Action Plan, the proposed 2040 climate target takes fully into account the current economic, security and geopolitical landscape and gives investors and businesses the predictability and stability they need in the EU’s clean energy transition. By staying the course on decarbonisation, the EU will drive investment in innovation, create more jobs, growth, increase our resilience to impacts of climate change and become more energy independent,” the statement adds.

Von der Leyen said industry and investors require a predictable direction on the path to the climate goal

“As European citizens increasingly feel the impact of climate change, they expect Europe to act. Industry and investors look to us to set a predictable direction of travel,” said European Commission President Ursula von der Leyen.

Today’s proposal is based on an impact assessment and advice from the Intergovernmental Panel on Climate Change (IPCC) and the European Scientific Advisory Board on Climate Change. The adoption follows engagement with member states, the European Parliament, stakeholders, civil society and citizens since the commission’s recommendation in February 2024.

EU eyeing international carbon credits

The commission vowed to consider a limited role for high-quality international carbon credits, starting in 2036, and greater flexibility across sectors to help achieve targets in a cost-effective and socially fair way. For instance, a member state would have the possibility to compensate for a struggling land use sector with an overachievement in reducing emissions from waste and transportation.

Emphasis is also on the competitiveness of the European industry and a level playing field with international partners. Among the guidelines is technological neutrality.

Fiscal incentives are under consideration for clean tech and industrial decarbonization projects.

The commission highlighted its Clean Industrial Deal State Aid Framework, adopted last week, and the simplification of the Carbon Border Adjustment Mechanism (CBAM). It also issued a recommendation on tax incentives for investments in clean technologies and industrial decarbonization.

Measures on affordable energy to scale up manufacturing of grid components and support power purchase agreements, the pilot for the upcoming Industrial Decarbonisation Bank, the forthcoming Chemicals Industry Action Plan and the sectorial dialogues with stakeholders are among the actions that will help deliver the Clean Industrial Deal, the commissioners explained. Their draft seven-year budget, officially called Multiannual Financial Framework, is due to be unveiled next month.

WindEurope urges for annual targets for renewables

Reacting to the announcement, WindEurope said EU member states would need to translate the 90% ambition into clear annual goals for the deployment of wind and other renewables for the period 2031-40.

“Otherwise the 2040 target will remain academic,” the organization underscored.