EU 2040 climate target finalised, ETS2 delayed by one year to 2028

What happened

On 5 March 2026, the Council of the EU formally adopted the amendment to the European Climate Law, finalising a binding 2040 target for the EU. The European Parliament had approved the political agreement reached with the Council in February 2026, with 413 votes in favour, 226 against and 12 abstentions.

Main elements of the amendment:

• 2040 target: A 90 percent reduction in net greenhouse gas emissions compared with 1990, as an intermediate step towards the 2050 climate neutrality goal.
• International credits: From 2036, high-quality international credits of up to 5 percent of the EU's 1990 net emissions may count towards the target. These credits cannot be used for EU ETS compliance.
• ETS2: The second emissions trading system (ETS2), which covers fuel combustion in buildings and road transport, will start on 1 January 2028 instead of 2027. Allowance auctions still begin in 2027 as planned, and monitoring and reporting obligations continue.
• Permanent removals: Rules on the use of permanent carbon removals such as BioCCS and DACCS in the EU ETS will be set in the 2026 ETS review.
• Monitoring: Implementation of the Climate Law is to be assessed every two years.

The amendment enters into force 20 days after its publication in the Official Journal of the EU.

Who is affected

The EU ETS and CBAM will keep tightening in line with the 2040 target, which clarifies the long-term direction of carbon costs for Turkish industrial companies exporting to the EU. The international credit window means a possible source of demand after 2036 for companies in Türkiye developing projects aligned with Article 6 of the Paris Agreement, although quality criteria for these credits have not yet been set. For Turkish groups that operate buildings or fleets in the EU, or supply fuel to the EU, the ETS2 delay provides an extra year of preparation.

What companies should do

• Update your carbon price scenarios for business models tied to the EU market in line with the 2040 target.
• Set an internal carbon price for investment decisions and link it to expected EU ETS prices.
• Assess projects with potential to generate Article 6 credits against quality and authorisation criteria.

For Türkiye's own 2035 target, see our separate news item. Alalëa supports internal carbon pricing and scenario analysis: internal carbon pricing.