The European Union has formally agreed to enshrine a binding target to reduce net greenhouse gas emissions by 90% by 2040 compared with 1990 levels, marking a key milestone en route to climate neutrality by 2050.

Under the provisional agreement reached by EU lawmakers and member states, the bloc will also introduce flexibility mechanisms for carbon credits. From 2036, up to 5 percentage points of the required emissions reductions may be achieved through high-quality international carbon credits, subject to stringent governance and integrity safeguards.

Lawmakers also agreed to postpone the launch of ETS2 — the emissions trading system extension covering buildings and road transport fuels — to 2028, citing concerns over economic competitiveness and cost pressures on households and businesses.

The deal is positioned as a balance between ambitious climate targets and economic realities, aiming to maintain the EU’s roadmap to climate neutrality while allowing flexibility and cohesion across diverse member-state economies. Critics, however, argue that allowing carbon credits may dilute domestic emissions action and call for rigorous quality standards to ensure real climate benefits.

The outcome represents an intermediate milestone between the EU’s current 2030 goal of at least a 55% reduction in net emissions and its long-term climate neutrality objective for 2050.