Carbon Reduction Activities in Europe: December 2025
Executive Summary: The European Union has made significant strides in its climate policy by agreeing on a 90% reduction in greenhouse gas emissions by 2040, compared to 1990 levels. This agreement includes the use of international carbon credits and domestic carbon removals to achieve the target. Additionally, the EU Emissions Trading System (ETS) is set to expand, with a new ETS2 covering buildings and road transport, although its implementation has been delayed to 2028.
Introduction
Between December 8 and December 14, 2025, the European Union (EU) announced several key developments in its carbon reduction strategy. These initiatives are part of the EU’s broader commitment to achieving climate neutrality by 2050 and include a new legally binding target for 2040.
2040 Climate Target Agreement
On December 10, 2025, the European Union reached a provisional political agreement to reduce net greenhouse gas emissions by 90% by 2040, compared to 1990 levels. This target serves as an intermediate step towards the EU’s long-term goal of climate neutrality by 2050. The agreement allows for the use of high-quality international carbon credits to meet up to 5% of the 2040 target, with the remainder to be achieved through domestic carbon removals. (Source, Source)
EU Emissions Trading System (ETS) Developments
The EU’s Emissions Trading System (ETS), a cornerstone of its climate policy, is set to expand with the introduction of ETS2, which will cover CO2 emissions from fuel combustion in buildings and road transport. However, the implementation of ETS2 has been postponed by one year to 2028. This delay is intended to provide industries with more time to adapt to the new regulations. (Source, Source)
Carbon Pricing and Market Reactions
In response to the tightening of climate targets, European carbon prices have risen significantly, reaching €83.79 per tonne on December 15, 2025. This increase reflects heightened market demand and confidence in the emissions cap tightening. The rise in carbon prices is seen as a strong policy signal to cut greenhouse gas emissions. (Source, Source)
Review and Monitoring
The European Commission will conduct biennial reviews of the 2040 target, assessing progress based on the latest scientific data, technological developments, and the EU’s international competitiveness. These reviews will help ensure that the EU remains on track to meet its climate goals and can adjust policies as necessary. (Source)
Conclusion
The recent developments in the EU’s carbon reduction strategy highlight a strong commitment to achieving significant emissions reductions by 2040. The integration of international carbon credits, expansion of the ETS, and regular progress reviews are key components of this strategy, aimed at balancing climate ambition with economic competitiveness.
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