The amended climate law outlines several core provisions that will shape the EU’s decarbonization strategy over the coming decades.
Under the amended climate law, the EU must reduce net greenhouse gas emissions by 90% by 2040 compared with 1990 levels. The milestone bridges the gap between the bloc’s 2030 emissions target and its 2050 climate-neutrality goal, effectively accelerating the timeline for deep decarbonization across the European economy.
At least 85% of emissions reductions must take place within the European Union, requiring significant decarbonization across sectors such as industry, energy, transport, and buildings. This focus on domestic action ensures that most emissions cuts come from structural changes within the EU economy rather than relying heavily on international carbon credits.
From 2036 onward, EU countries may use international carbon credits to meet part of the target. This mechanism is intended as a flexibility tool rather than a primary compliance pathway.
International credits can cover not more than 5% of the EU’s 1990 emissions baseline. This cap ensures that the bulk of effort remains focused on real emissions reductions within the EU economy.
Any carbon credits used must originate from verified emissions-reduction projects in partner countries and comply with rules under the Paris Agreement. These safeguards are designed to maintain environmental integrity, prevent double counting of emissions reductions, and support credible international climate cooperation.
Together, these provisions maintain a strong focus on domestic emissions reduction while allowing limited flexibility for countries and sectors facing higher transition costs.
The amended EU climate law also highlights the growing role of carbon removals in addressing emissions that are difficult to eliminate entirely. While the EU’s primary focus remains on reducing greenhouse gas emissions across sectors, carbon removals are increasingly viewed as a complementary tool for managing residual emissions. Carbon removals involve capturing carbon dioxide from the atmosphere and storing it in long-term reservoirs, helping balance emissions from sectors where full decarbonization remains challenging, such as certain industrial processes, aviation, and agriculture. The policy framework references several carbon removal approaches, including:
Technological solutions, such as carbon capture and direct air capture combined with permanent geological storage
Nature-based approaches, including forest restoration, soil carbon enhancement, and ecosystem management
Long-term storage systems designed to prevent captured carbon from re-entering the atmosphere
EU policymakers emphasize that carbon removals are intended to support emissions reduction efforts rather than replace them, ensuring that deep cuts in fossil-fuel use remain the central pillar of the bloc’s climate strategy.
The agreement also introduces adjustments to the timeline for expanding the EU’s carbon pricing system. The second emissions trading system (ETS2), which will cover additional sectors such as road transport and buildings, will now become fully operational in 2028 instead of 2027. This delay is intended to give governments and industries additional time to prepare for the policy changes and implement the regulatory and operational frameworks required for compliance. While the adjustment slightly extends the implementation timeline, the expansion of carbon pricing across additional sectors remains a central component of the EU’s broader decarbonization strategy.
The adoption of the amended climate law marks the final step in establishing the EU’s 2040 climate target at the legislative level. Once published in the Official Journal of the European Union, the regulation will enter into force after 20 days and will apply directly across all EU member states. This gives the framework immediate legal relevance for national policy design and corporate compliance planning. The European Commission will now prepare additional legislative proposals to support implementation of the new target, including sector-specific measures, financing tools, and updates to the EU’s broader climate action plan and energy policies. The framework also requires a formal review of the EU’s climate change policy architecture every two years, during which the Commission will assess scientific developments, technological progress, economic competitiveness, energy prices, and the evolving role of carbon removals and international carbon credits. Based on these reviews, additional policy measures or adjustments may be proposed.
The EU’s 2040 climate target will accelerate the pace of decarbonization across industries and introduce new expectations for companies operating within or trading with the European Union. This applies not only to EU-based firms but also to suppliers and partners in other regions that serve European value chains. As the regulatory framework evolves, businesses may increasingly need to:
Organizations that move early to align with the EU’s 2040 climate target may be better positioned to maintain market access, attract sustainable financing, and build resilience as climate regulations continue to tighten.
As climate regulations continue to evolve, organizations are increasingly required to translate policy developments into clear operational strategies. The EU’s 2040 climate target signals how businesses will need to adapt their operations, investment decisions, and reporting practices in the coming decade. As a sustainability consultancy offering environmental consulting, Cognitud supports companies in preparing for these changes by helping them build robust greenhouse gas inventories, develop decarbonization roadmaps aligned with EU and global climate targets, and design transition plans that link emissions reduction with capital investment and operational transformation. Integrating expertise in climate policy, emissions accounting, and transition strategy, organizations can better navigate emerging regulatory frameworks, strengthen transparency, and identify practical pathways to remain competitive in an increasingly low-carbon economy.
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Abhigyan Gupta
Future-proof your organization with sustainability frameworks tailored to your sector.
Greenhouse gas emissions can be reduced by switching to renewable energy, improving energy efficiency, adopting clean transportation, protecting forests and ecosystems, and using technologies like carbon capture in hard-to-decarbonize industries.
Carbon is removed from the atmosphere by forests, soils, and oceans, as well as technologies like direct air capture and carbon storage.
Carbon credits are calculated based on the amount of greenhouse gas emissions reduced or removed, where one carbon credit equals one tonne of CO₂ (or equivalent) avoided or captured.
Carbon credits work by allowing companies to offset their emissions by purchasing credits from projects that reduce or remove carbon, where one credit equals one tonne of CO₂ reduced or removed.
Climate change is causing rising temperatures, extreme weather events, sea level rise, and disruptions to ecosystems, food systems, and water resources worldwide.
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