EU ETS and the EU 2040 Climate Target

In early July, the European Commission was expected to publish its proposal to revise the European Climate Law by setting a 2040 climate target. While a 90% net emissions reduction by 2040 had initially been proposed in February, new discussions had emerged around introducing flexibilities such as the use of international credits under Article 6 of the Paris Agreement—despite concerns from the ESABCC regarding their environmental integrity.

With the launch of ETS2 in 2027, covering emissions from buildings and road transport, the EU ETS was set to regulate 75% of the EU’s total emissions—making it central to achieving the 2040 target.

As policymakers prepared for the 2026 review of the ETS, the  LIFE Effect project organised the 'Carbon Pricing Hub Series' to discuss:

• Managing the ‘ETS homestretch’ and addressing market liquidity challenges through to 2040
• Reform options for the Market Stability Reserve to ensure a robust carbon price that drives decarbonisation
• The role of carbon removals and the implications of including Article 6 credits in the EU’s climate target