EU Emissions Reform Threatens 2040 Target
A WWF-commissioned analysis says the proposed ETS changes could push cuts onto other sectors if adopted as drafted.
Updated on Nov. 2, 2026 in Environmental
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An analysis commissioned by WWF Germany and carried out by Öko-Institut finds the European Commission's proposed reform of the EU Emissions Trading System incompatible with the bloc's 2040 target of cutting emissions by 90%. The proposal is a proposal, not an enacted policy, so the reform remains research-stage analysis rather than settled law.
Why it matters
The reform would raise ETS allowance supply by up to 10% above projected demand and let additional emissions in exchange for future permanent carbon removals, a technology whose cost is still forecast to exceed the carbon price in the medium term. The debate illustrates how carbon markets lean on offsets and removals whose real-world delivery is still unproven.
The analysis is a modeling study of an unadopted policy proposal, weighed against the 90% 2040 target and the track record of international credits, of which only 16% have delivered genuine emissions reductions. The EU has not yet stated how it would close any shortfall, and the modeled outcomes depend on assumptions about removal costs that are still forecast rather than observed.
The players
WWF Germany
The German arm of the global conservation organization, which commissioned the analysis and advocates for stricter EU climate policy.
Öko-Institut
A German environmental research institute that carried out the analysis of the Commission's ETS proposal.
European Commission
The EU's executive body, which proposed the reform of the Emissions Trading System.
European Scientific Advisory Board on Climate Change
An advisory body that found only 16% of international carbon credits to date have delivered genuine emissions reductions.
The details
The Emissions Trading System works as a cap-and-trade market: a fixed number of allowances caps total emissions, and companies buy and sell them. The Commission's proposal increases allowance supply and permits extra emissions in return for future permanent carbon removals, meaning technologies that pull CO2 from the air and store it durably. Because those removals are expected to cost more than the carbon price for some time, the analysis argues the trade-off delays cuts and pushes more of the burden onto other sectors.
Timeline
2031 to 2035: WWF recommends a 4.4% linear reduction factor during this window.
2036: WWF recommends a 2.7% linear reduction factor beginning from this year.
2040: The EU's year for its 90% emissions reduction target.
The Tech Race
The proposal's reliance on permanent carbon removals places it in a contest over whether direct air capture and similar technologies can scale and drop in cost fast enough to matter. The analysis suggests those technologies are not yet cheap enough to substitute for cuts within the market's price range.
The reform is a proposal, so its effects on prices and emissions would only reach businesses and consumers if the Commission adopts it. The timeline for any adoption has not been stated in the source extraction.
The takeaway
Watch whether the Commission's proposal is adopted and whether it is accompanied by a credible plan for the 2040 gap. Track the 2036 linear reduction factor WWF recommends as a benchmark for whether any final reform keeps emissions on course.
Further reading
For broader context on how carbon markets are designed and tested, see the Environmental section.
Source note: This article includes information reported by EUbusiness.
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