Article 6 carbon credits would allow the EU to emit 50% more greenhouse gas emissions in 2040
According to a policy brief by the NewClimate Institute.
A recent policy brief by the NewClimate Institute warns that using international carbon credits in the EU’s emissions trading system would allow the EU to emit 50% more greenhouse gases in 2040. That’s compared to a scenario without the use of carbon credits.
Under the EU’s recently agreed new rules, 5% of emissions can be “offset” by international carbon credits.
Without the use of carbon credits, emissions in 2040 in the EU would be capped at 483 million tons carbon dioxide equivalent. The 5% offsets allowance means that in 2040, 241 million carbon credits could be bought, giving a total of 724 million tons of CO₂e in the EU.
The policy brief was funded and commissioned by Klima-Allianz Deutschland, a coalition of more than 150 organisations.
In addition to looking at the impact of 5% offsets at the European level, the policy brief also looks at the impact in Germany, where the 5% carbon credits “would translate to 42% of additional emissions in 2040”.
The policy brief notes that “experience with international carbon markets shows that these projects often have significant social and human rights impacts”. These impacts are not the focus of the policy brief. Instead, the NewClimate Institute highlights the risks for the EU and Germany focusing on economic viability, feasibility, and costs.
The policy brief is in German — here is my translation of the key points:
Not a flexibility mechanism. The Paris Agreement sees Article 6 as an instrument to increase ambition, not as a flexibility mechanism for national climate protection efforts.
High costs until 2040. The EU decision sets high quality requirements for the acquisition of Article 6 carbon credits to ensure effective climate protection. These correspondingly expensive certificates could place a significant burden on the federal budget. In Germany, the cost of certificates could reach a level equivalent to the entire budget of the Climate and Transformation Fund in 2026 (approximately €37 billion). The money spent on carbon credits would no longer be available for the transformation of the economy and socially just climate protection in the EU and Germany, thus delaying progress in this area.
Loss of technological leadership. In the target year 2040, the use of Article 6 allowances could allow up to 50% (241 MtCO₂e) of additional emissions in the EU and up to 42% (63 MtCO₂e) in Germany. This flexibility reduces both the need and the incentive to invest in forward-looking key technologies. As a result, the EU and Germany could lose five valuable years for technological development and put their competitiveness at risk.
Questionable feasibility. According to the decisions, the EU could acquire up to 724 million1 carbon credits by 2040. However, it is questionable whether the market can supply these quantities, as the production of certificates in countries of the Global South directly competes with meeting their own climate protection targets, which are set out in the Nationally Determined Contributions (NDCs).
High costs even after 2040. The use of carbon credits will postpone significant emission reductions until after 2040. The cost pressure will be shunted into the future increasing it considerably, as significant additional investment will be needed to return to the original emission trajectory and achieve climate neutrality.
Competitive disadvantages. The new decisions could put companies that are already committed to climate neutrality and whose strategies are aligned with the existing reduction path at an economic disadvantage. The changed framework conditions will make it more difficult to rely on a stable and long-term reduction path. This creates additional uncertainty for companies regarding investments and strategic planning.
CORRECTION — 6 March 2026: I initially wrote that this number appeared to be a mistake. It is not.
My understanding was that without carbon credits, emissions in 2040 would be 483 million tons CO₂e. The number of carbon credits allowed in 2040 would 241 million. The total emissions in the EU in 2040 would be 724 million tons CO₂e. NewClimate Institute’s policy brief includes this graphic to illustrate the situation in 2040 if Article 6 carbon credits are allowed:
Joshua Senne from NewClimate Institute contacted me to explain that the figure 724 million is used in the policy brief for two different quantities. The first is the projected domestic emissions in the year 2040, as explained in the graphic above.
The second quantity is 724 million credits, which Senne explains “refers to the cumulative volume of international credits the EU could be buying throughout the whole NDC period 2036 - 2040 under the scenario that they start buying credits in 2036 and reach 5% in 2040”.
The first is a single‑year emission level, the second is a five‑year cumulative credit volume.
I am grateful to Senne for explaining this and apologise for my mistake.