EU Carbon Reform Clashes With 2040 Climate Target
An Öko-Institut analysis commissioned by WWF Germany finds the Commission's proposed ETS overhaul incompatible with the bloc's 90% emissions cut by 2040.
Updated on Nov. 2, 2026 in Environmental
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An analysis by Öko-Institut, commissioned by WWF Germany, found that the European Commission's proposed reform of the EU Emissions Trading System is incompatible with the EU's 2040 target of reducing emissions by 90%. The proposal would increase allowance supply by up to 10% above projected demand and open the door to international carbon credits.
Why it matters
The analysis suggests the EU would either miss its 2040 climate target or shift a greater share of the reduction burden onto other sectors. The findings raise questions about whether reliance on carbon removals and international credits can deliver the reductions the target requires.
Only 16% of international carbon credits to date have delivered genuine emissions reductions, according to the European Scientific Advisory Board on Climate Change. The proposal would raise ETS allowance supply by up to 10% above projected demand, and the analysis's ultimate effect on the 2040 target remains unresolved.
The players
European Commission
The EU's executive body, which proposed the reform of the Emissions Trading System and the increase in allowance supply.
WWF Germany
The German branch of the World Wide Fund for Nature, which commissioned the Öko-Institut analysis of the proposed reform.
Öko-Institut
A German independent research institute focused on environmental policy and sustainability that conducted the analysis of the ETS proposal.
The details
The Commission's proposal allows additional emissions beyond the existing cap in exchange for future permanent carbon removals, and relies on international credits. The analysis argues that emissions would remain too high for too long if the reform proceeds as proposed.
Timeline
2040: EU target year for a 90% emissions reduction.
2031 to 2035: WWF recommends a 4.4% linear reduction factor.
Big Picture
The proposed reform would extend the EU Emissions Trading System by adding allowances and international credits, a departure from the cap-based design the 2040 target assumes. The analysis's finding that the reform conflicts with that target places the Commission's approach in tension with the bloc's climate commitments.
Changes to ETS allowance supply and carbon pricing could affect the cost of emissions-intensive activity across the EU. The reform's treatment of international credits and permanent removals will determine how much of the reduction burden falls on other sectors.
The takeaway
Carbon targets depend on the quality of the offsets and removals that fill the gap, not just on the headline cap. Readers tracking climate policy should watch whether the final ETS reform keeps the 2040 target intact.
Further reading
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