EU's New Climate Target Boosts Carbon Markets
After lengthy negotiations, European Union member states agreed on a new target to reduce emissions by 90% from 1990 levels by 2040. The compromise includes allowing the use of foreign carbon credits to cover up to 5% of remaining emissions.
The agreement, which still requires approval from the European Parliament, could result in the EU purchasing around 710 million metric tonnes of CO2e offsets valued at approximately 50 billion euros (57 billion dollars) during the 2030s. This move is expected to significantly strengthen the carbon market for emission reduction projects currently facing low demand and heightened scrutiny.
“Five percent may seem small compared to the EU’s overall emissions cuts, but in absolute terms it represents a vast volume of offsets, and therefore, massive investments in offset projects,”
said Trishant Dev, carbon markets lead at the Centre for Science and Environment, a think tank based in Delhi.
According to the Carbon Market Watch campaign group, the EU’s purchase plan could help stabilize and expand global carbon trading networks. However, campaigners warn that expanding reliance on offsets could weaken the integrity of the EU’s emission reduction pathway.
Additional Offset Flexibility
In addition to the 5% foreign offset allowance based on 1990 emission levels, EU nations may also offset up to 5% of their national emissions. This flexibility provides some breathing room for countries struggling to achieve strict domestic targets but has drawn criticism from environmental advocates concerned about potential loopholes.
Author's Summary
The EU’s 2040 climate target could trigger about 50 billion euros of carbon credit purchases in the 2030s, invigorating carbon markets while reigniting debates about offset integrity.