Regulation (EU) 2026/667 of the European Parliament and of the Council of 11 March 2026 amending Regulation (EU) 2021/1119 as regards the setting of a Union intermediate climate target for 2040

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 192(1) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee (1),

After consulting the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) The outcome of the first global stocktake under the Paris Agreement (3), concluded at the United Nations Climate Change Conference at the end of 2023, found that Parties are putting increasingly effective climate policies in place, but that urgent additional action is needed to put the world fully on track for achieving the goals of the Paris Agreement.

(2) Through the adoption of Regulation (EU) 2021/1119 of the European Parliament and of the Council (4), the Union has enshrined in legislation a binding objective of economy-wide climate neutrality by 2050, thus reducing greenhouse gas emissions to net zero by that date, and the aim of achieving negative emissions thereafter. That Regulation also established a binding intermediate Union climate target for 2030 and required the setting of a Union-wide intermediate climate target for 2040.

(3) Taking into account the scientific advice by the European Scientific Advisory Board on Climate Change (the ‘Advisory Board’) and based on a detailed impact assessment, the Commission presented, in its communication of 6 February 2024 entitled ‘Securing our future. Europe’s 2040 climate target and path to climate neutrality by 2050 building a sustainable, just and prosperous society’, a recommended target of a 90 % net greenhouse gas emission reduction for 2040 compared to 1990 levels.

(4) In order to propose the Union 2040 climate target, the Commission considered the following elements: the best available and most recent scientific evidence, including the latest reports of the Intergovernmental Panel on Climate Change (IPCC) and the Advisory Board; the social, economic and environmental impacts, including the costs of inaction; the need to ensure a just and socially fair transition for all; cost-effectiveness and economic efficiency; competitiveness of the Union’s economy, in particular that of small and medium-sized enterprises (SMEs) and of sectors most exposed to carbon leakage; best available cost-effective, safe and scalable technologies; energy efficiency, including the ‘energy efficiency first’ principle; energy affordability and security of supply for all Member States; fairness and solidarity between and within Member States; the need to ensure environmental effectiveness and progression over time; the need to maintain, manage and enhance natural sinks in the long term and protect and restore biodiversity, including in the marine environment; investment needs and opportunities; international developments and efforts undertaken to achieve the long-term objectives of the Paris Agreement and the ultimate objective of the United Nations Framework Convention on Climate Change; and existing information on the projected indicative Union greenhouse gas budget for the 2030-2050 period.

(5) In order to achieve the 2040 climate target it is essential, inter alia, to fully implement the agreed 2030 policy framework; to ensure and provide support to enhance and bolster the competitiveness and resilience of the European industry; to ensure sustainable food systems as well as the resilience of rural communities and food security through a sustainable and robust European agricultural sector; to ensure transition pathways based on best available cost-effective, safe and scalable technologies; and to set a greater focus on a just transition for affected regions, sectors and vulnerable households that leaves no one behind, for example through support from the Social Climate Fund (5), in the transition to climate neutrality. Furthermore, it is essential to ensure fair competition with international partners and to make effective use of all Union economic instruments to deter and counter unfair trade practices, to decarbonise the energy system with a technologically neutral approach that includes all zero- and low carbon energy solutions (including renewables, nuclear, energy efficiency, storage, carbon capture and storage (CCS), carbon capture and utilisation (CCU), carbon removals, geothermal and hydro-energy, sustainable bioenergy and all other current and future net-zero energy technologies), to reduce import dependencies and diversify the Union’s sources of critical raw materials, and to organise a strategic dialogue on the post-2030 framework with all relevant sectors, including industry and transport.

(6) In its conclusions of 23 October 2025, the European Council stated that enhancing the Union’s competitiveness, bolstering its resilience and advancing the green transition are mutually reinforcing objectives that must be pursued together, and called for an urgent stepping up of efforts to secure the supply of affordable and clean energy and build a genuine Energy Union before 2030, including by leveraging the new Energy Union Task Force, as well as for accelerating work aimed at lowering energy prices and supporting sustainable energy production domestically in the Union. With a view to ensuring a cost-effective, fair and just, pragmatic and socially balanced transition towards climate neutrality, taking into account different national circumstances, both private and public sector investment, including through Union funding, will be a key enabler for the clean transition, for example by supporting and accelerating the deployment and commercialisation of innovative technologies across Member States, by supporting access to industrial renewal and decarbonisation, clean tech manufacturing and the modernisation of energy systems, and by providing affordable solutions across the economy and for citizens throughout the Union. The Clean Industrial Deal, launched in the Commission’s communication of 26 February 2025 entitled ‘The Clean Industrial Deal: A joint roadmap for competitiveness and decarbonisation’, is putting the conditions in place for a successful transition, focusing on both decarbonisation and industrial renewal, which will contribute to boosting demand for ‘made in Europe’, and support mechanisms for European industry, including an industrial decarbonisation bank and the new simplified State aid framework.

(7) The European Council recalled in its conclusions of 23 October 2025 the urgent need to intensify collective efforts to ensure Europe’s industrial renewal, modernisation and decarbonisation in a technologically neutral manner. It underlined in that context that particular attention should be paid to traditional industries, notably the automotive, shipping and aviation industries as well as energy-intensive industries, such as steel and metals, chemicals, cement, glass and ceramics, and pulp and paper, so that they remain resilient and competitive in a global market and a challenging geopolitical environment. In that regard, it welcomed the Commission proposal to protect the European steel sector from unfair impacts of global overcapacity. It also welcomed the Commission’s intention to take forward the review foreseen under Regulation (EU) 2019/631 of the European Parliament and of the Council (6), and it called for the swift presentation of that proposal, taking into account technological neutrality and European content. In that context, the European Council welcomed the letter from the President of the Commission on climate and competitiveness of 20 October 2025.

(8) The Clean Industrial Deal focuses also on better access to public and private finance, an integrated and interconnected Union energy market ensuring energy security, promotion of a circular economy, a global level playing field including through the effective implementation and extension of the carbon border adjustment mechanism (7) to downstream goods, introducing anti-circumvention measures and action to address export carbon leakage, and clear enabling conditions such as streamlined permitting and the uptake and scaling of clean technologies, in order to strengthen the Union’s competitive edge and industrial competitiveness and strengthen innovation in the Union, taking into account the challenging geopolitical environment.

(9) In light of the objective of climate neutrality by 2050, greenhouse gas emissions should, by 2040, be reduced and removals enhanced, to ensure that the net greenhouse gas emissions, that is emissions after deduction of removals, are reduced economy-wide by 90 % by 2040 compared to 1990 levels.

(10) Priority should be given to domestic reductions in greenhouse gas emissions, complementing it by increased removals, including through both natural and technological solutions. In the development of the post-2030 policy package, due attention should be paid to the contribution of gross emission reductions versus natural and technological removals. Natural removals have characteristics that should be taken into account, such as forest age structure, proportion of organic soils, natural variability, and uncertainties related to the impacts of climate change, to natural disturbances and to changes in methodologies. Natural and industrial removals will play an increasing role in the Union’s economy in the coming decades, in view of the need to balance greenhouse gas emissions and removals at the latest by 2050 and negative emissions thereafter. Incentives will be developed in the context of the review of Directive 2003/87/EC of the European Parliament and of the Council (8) in 2026, where the Commission envisages to provide for the inclusion of domestic permanent carbon removals in the system for greenhouse gas emission allowance trading within the Union (the ‘EU ETS’) to compensate for residual hard to abate emissions. The land use, land- use change and forestry sector has a central role in a sustainable and circular bioeconomy and has the potential to provide long-term climate and environmental benefits, contributing to the clean transition of the Union economy and reducing dependencies by substituting fossil-based materials.

(11) While some enabling policies have already been implemented and their impact is already visible, this is not yet the case for all such policies. The Commission should continue to strengthen the initiatives concerning the enabling framework and aim to accelerate their adoption to ensure that conditions are in place to support European industry and citizens throughout the transition, in full respect of Union law.

(12) The Union has in place a regulatory framework to achieve the 2030 climate target. The legislation implementing that target consists, inter alia, of Directive 2003/87/EC, which establishes the EU ETS, Regulation (EU) 2018/842 of the European Parliament and of the Council (9), which introduced national targets for reduction of greenhouse gas emissions by 2030, and Regulation (EU) 2018/841 of the European Parliament and of the Council (10), which sets net carbon removal targets for the land-use sector. In order to ensure a smooth transition to the emissions trading system for buildings, road transport and additional sectors set out in Chapter IVa of Directive 2003/87/EC (the ‘ETS2’), the operation of emissions trading for those sectors should be postponed by one year and the rules set out in Article 30k(2), points (a) to (e), of Directive 2003/87/EC should apply. The Commission should assess how the relevant Union legislation would need to be amended in order to achieve the 2040 climate target, also taking into account declining natural sink capacity. When designing the post-2030 framework, the Commission should prepare detailed impact assessments, taking into account its analysis of the integrated national energy and climate plans, the geopolitical environment, including the need to ensure the capacity of the Union and its Member States to rapidly increase and strengthen their defensive capacity by addressing possible burdens while maintaining incentives for industrial decarbonisation, the impacts on competitiveness, SMEs and energy intensive industries, and the impacts on energy costs and investment needs across Member States, and should consider taking necessary measures, including legislative proposals as appropriate.

(13) A number of elements to facilitate the achievement of the 2040 climate target should be appropriately reflected in those legislative proposals, including: an adequate contribution towards the 2040 climate target of high-quality international credits under Article 6 of the Paris Agreement from 2036 to 2040, in a way that is both ambitious and cost-efficient and in line with the accounting rules of the Paris Agreement, including a pilot period to initiate a high-quality and high-integrity international credit market from 2031 to 2035; the role of domestic permanent removals (such as biogenic emissions capture with carbon storage (BioCCS) and direct air capture with carbon storage (DACCS)) in the EU ETS, while ensuring the environmental integrity of the EU ETS, including the possibility to store CO2 outside the Union, as appropriate, subject to the existence of international agreements and providing for conditions equivalent to those laid down in Union law; and enhanced and accessible flexibility across and within sectors and instruments to support a cost-effective approach whereby, for example, Member States’ achievements in one sector can balance gaps in other sectors in a cost-efficient way while ensuring that each sector contributes to the efforts, and ensuring that possible shortfalls in one sector would not be at the expense of other economic sectors, without prejudice to each Member State’s possibility to make use of the flexibilities. In operationalising the use of international credits, the Commission should take into account the need to ensure a level playing field across Member States and the opportunity to support strategic Union partnerships in line with the interests of the Union. The current EU ETS trajectory should be revised in the upcoming review of Directive 2003/87/EC to take into account the agreed 2040 target in a manner that would allow for a limited amount of emissions after 2039. The Commission should consider in a timely manner a slower phase-out pathway for free allocation of allowances from 2028 onwards to support decarbonisation, investment and employment in the Union, including through an industrial decarbonisation bank and a review of the market stability reserve (11), while minimising the risk of carbon leakage. In order to assess the social, economic and environmental impacts, the post-2030 framework should be based on robust impact assessments. The post-2030 framework should also foster convergence while taking into account fairness and Member States’ national circumstances and specificities, including those of islands, island Member States and outermost regions.

(14) Since the objective of this Regulation, namely to set a Union intermediate climate target for 2040, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(15) Regulation (EU) 2021/1119 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

Amendments to Regulation (EU) 2021/1119

Regulation (EU) 2021/1119 is amended as follows:

(1) in Article 1, second paragraph, the following sentence is added: ‘This Regulation also sets out a binding Union target for 2040.’

(3) in Article 4, the following paragraph is added: ‘8.   From 6 March 2027 and every two years thereafter, the Commission shall assess and report on the implementation of the intermediate targets and decarbonisation trajectories set out in this Regulation, taking into account the latest scientific evidence, technological advances and evolving challenges to and opportunities for the Union’s global competitiveness. That assessment may be accompanied, where appropriate, by legislative proposals.’

(5) in Article 11, the second paragraph is replaced by the following: ‘The Commission’s report shall be accompanied, where appropriate, by legislative proposals to revise this Regulation, including the intermediate 2040 target, and by additional measures to strengthen the initiatives concerning the enabling framework supporting the continued effective implementation of this Regulation, in line with Article 4(5), and securing Union competitiveness, prosperity and social cohesion.’.

Article 2

Postponement of the operation of emissions trading for buildings, road transport and additional sectors

The operation of emissions trading for buildings, road transport and additional sectors set out in Chapter IVa of Directive 2003/87/EC shall be postponed until 2028. The rules set out in Article 30k(2), points (a) to (e), of Directive 2003/87/EC shall apply. The provisions of Article 10a(8b) of Directive 2003/87/EC shall apply also in 2026.

Article 3

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Strasbourg, 11 March 2026.

For the European Parliament The President R. METSOLA

For the Council The President M. RAOUNA

(1) OJ C, C/2026/37, 16.1.2026, ELI: http://data.europa.eu/eli/C/2026/37/oj.

(2) Position of the European Parliament of 10 February 2026 (not yet published in the Official Journal) and decision of the Council of 5 March 2026.

(3) OJ L 282, 19.10.2016, p. 4.

(4) Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, p. 1, ELI: http://data.europa.eu/eli/reg/2021/1119/oj).