CORRECTION: International carbon credits would allow EU to emit up to 50% more in 2040 – researchers
Clean Energy Wire
[CORRECTION: A previous headline incorrectly stated that international climate credits would allow the EU to double domestic emissions in 2040, this has been corrected to state that the use of international carbon credits would allow up to 50% of additional emissions in the EU in 2040.]
The use of international carbon credits by European countries to meet greenhouse gas emission reduction targets could lead to significantly higher emissions at home, the NewClimate Institute warned. Using carbon credits from outside the EU as a “flexibility mechanism” for national climate targets could lead to up to 50 percent more emissions in 2040 and make the path to climate neutrality by 2050 much costlier, the researchers calculated in a policy brief.
Under Article 6 of the Paris Agreement, a global treaty to limit global temperature increases, voluntary international cooperation to meet climate targets is allowed, for example through carbon markets, where emissions in one location can be balanced out by savings in another.
When deciding on its 2040 climate target to reduce emissions by 90 percent compared to 1990 levels, the EU agreed to allow the use of international credits up to five percent of 1990 net emissions.
The researchers calculated the impact on economic efficiency, feasibility, and costs of Germany’s and the EU’s use of these credits. They found that if the EU uses credits to this extent in reaching its climate targets, it could increase domestic emissions by 241 million metric tonnes of carbon dioxide equivalent (MtCO2e) in 2040.
This “would allow the EU to emit up to 50 percent more in 2040, compared to a scenario without use of credits,” the NewClimate Institute concluded. “For Germany, the five percent use of credits would translate to 42 percent of additional emissions in 2040.”
Due to the EU’s high-quality criteria for carbon credits, costs for acquiring them would be high, which in turn could reduce Germany’s available budget for climate action and the energy transition, the researchers added. In addition, reduced incentives to invest in new technologies could weaken Germany’s position as a technology leader, and could result in economic disadvantage for companies that are already committed to climate neutrality and whose strategies are aligned with the existing reduction pathway.
The EU is set to table a new set of laws to achieve the new 2040 target, informally termed the “Fit for 90” package in Brussels, in the second half of 2026. The package would update key climate policies, including the EU Emissions Trading System (EU ETS), while introducing stronger incentives for renewables, electrification, and green technologies. A major focus will be integrating permanent carbon removals into the ETS and the use of international carbon credits.