After an intense night of negotiations in Brussels, EU environment ministers reached a long-anticipated compromise on the Union’s mid-century climate trajectory and the future roll-out of carbon pricing for buildings and road transport. The deal, finalised in the early hours of 5 November, establishes a legally binding -85% greenhouse gas reduction target by 2040 compared to 1990 levels, down from the Commission’s original proposal of -90%. It also delays the launch of the ETS2 system for buildings and road fuels by one year, moving the start from 2027 to 2028.
The agreement was politically essential ahead of COP30 in Belém. Member states had entered the negotiations with widely divergent positions, ranging from calls for maintaining maximum ambition to arguments that economic and social pressures required a slower transition. With geopolitical uncertainty, high energy costs and ongoing inflation concerns weighing on political sentiment, the Council opted for a compromise that preserves long-term climate ambition while offering governments more flexibility in how they meet the target.
A softer pathway, but still binding
The new 2040 goal remains legally binding and cements the EU’s long-term path toward climate neutrality by 2050. However, ministers unlocked expanded options for international carbon credits, allowing up to 5% of the 2040 reduction to come from outside the EU through high-quality Article 6 credits under the Paris Agreement. In exceptional circumstances, such as large-scale natural disasters, a further 5% flexibility may be used, potentially reducing the domestic reduction effort to 80%.
Alongside the headline target, ministers endorsed an indicative 2035 emissions range of –66.3% to –72.5%, which will shape the EU’s updated NDC submission. Crucially, the package includes a biennial review clause, permitting future adjustment of the target trajectory if proven necessary due to economic or technological developments. While framed as prudent governance, this mechanism also reinforces the political reality that Europe’s climate path will remain under continual scrutiny as the decade advances.
ETS2 delay: cushioning the impact on households
One of the most consequential elements for markets and households is the one-year deferral of ETS2, the new carbon pricing system for buildings and road transport. Pushed strongly by several Central and Eastern European member states concerned about consumer impacts, the postponement provides governments more time to prepare social compensation and energy-poverty mitigation measures.
The Council also reiterated the importance of price-stability safeguards in ETS2, including the intervention trigger around €45 (*2020) per ton, confirming that the system will be subject to guardrails to avoid destabilising price spikes during its early phase.
A deal struck between ambition and political realism
Although several governments, including Spain, the Netherlands and Sweden, pushed to retain maximum environmental integrity, others insisted that excessive rigidity risked economic backlash and public resistance. Germany played a crucial role in brokering the final text, ultimately accepting a higher level of international credits than previously supported by its governing coalition.
The Czech Republic, Poland, Hungary and Slovakia voted against the compromise, while Belgium and Bulgaria abstained, arguing variously for more ambition or greater flexibility. Despite this opposition, the agreement passed under qualified majority voting.
Outlook
The package now moves to the European Parliament, where negotiations will determine its final legislative form. Meanwhile, the Commission will begin preparing the next major climate policy package, effectively the successor to “Fit for 55”, expected to align industrial policy, clean-tech deployment, and social measures with the new framework.
Europe avoided arriving at COP30 without a credible 2040 trajectory. Yet the compromise reflects a broader shift in the climate debate: ambition balanced against affordability, and leadership tempered by geopolitical and social constraints. ETS2 remains intact but enters political reality more gradually; the 2040 target stands but with additional escape valves. The EU remains committed to climate neutrality, but with more flexibility and political insulation than originally envisioned.
Key Points
- 2040 target: legally binding -85% vs 1990 (down from -90% proposal)
- Offsets: up to 5% via international credits, with +5% emergency flexibility
- ETS2 launch: postponed to 2028
- Review mechanism: progress assessed every two years
- 2035 guidance: indicative -66.3% to –72.5% range
