EU climate policy 2040, Article 6 credits and the new SBTi draft: what companies need to know

EU climate policy 2040, Article 6 credits and the new SBTi draft: what companies need to know now

The European climate agenda is once again focused on tightening. Between 2030 and 2050 lies a crucial period in which policy, market initiatives and international agreements converge. Three recent developments stand out: the proposed 90 percent reduction target for 2040, the limited but strategic admission of international CO2 credits under Article 6 of the Paris Agreement, and the new draft version of the SBTi Corporate Net Zero Standard. In this article, we clearly outline these developments and sketch the key implications for companies that want to future-proof their climate strategy.

1. The proposed EU target of 90 percent emission reduction by 2040

The EU is building on the existing climate law with a minimum 55 percent reduction by 2030 and full climate neutrality by 2050. As a logical intermediate step, the European Commission has proposed achieving 90 percent less emissions by 2040 compared to 1990. The Council and Parliament have since politically aligned behind this. The target should make the transition towards 2050 predictable and investable.

In the latest political agreement, room has been created for limited flexibility with international credits. Where the initial proposal assumed a maximum of 3 percentage points, there is now a compromise allowing up to 5 percentage points of the 2040 target to be met with international CO2 reductions under Article 6. These credits may only be deployed from 2036 onwards and only under strict conditions. The main rule remains that at least approximately 85 percent of all emission reductions must take place within the EU itself.

For companies, this means that the European reduction pathway to 2040 becomes significantly steeper. Sectors heavily dependent on fossil processes such as heavy industry, aviation and transport will need to decarbonise earlier and deeper. In practice, this requires long-term decisions, accelerated electrification, contracting renewable energy, investing in process innovation and working with structured transition plans. Companies that invest timely in clear scenarios and audit-ready data maintain control over their transition path.

2. Article 6 credits: limited but strategic role

Article 6 of the Paris Agreement enables international cooperation through certified emission reductions, provided double counting is prevented and projects are demonstrably additional. These ‘internationally transferred mitigation outcomes’ are becoming increasingly important worldwide.

In the EU context, these credits are not part of ETS 1 or ETS 2. They are intended as a flexibility option for the EU targets themselves and not as a compliance instrument for companies within the emissions trading system. Member states or the EU can deploy them from 2036 to supplement a small part of the pathway to 2040. The requirements are strict. Transparent accounting, corresponding adjustments in the country of origin, additional climate benefit and independent verification are mandatory.

For multinationals, this has two consequences. Voluntary CO2 projects must increasingly meet Paris-proof integrity criteria. Companies using credits in their own net zero strategy must prepare for due diligence, traceability and transparent reporting. Additionally, international credits are at most a supplementary element in a broader climate strategy. The European line remains that own reduction is central and compensation is supplementary.

3. The new SBTi Corporate Net Zero draft: sharper, more specific and better aligned with CSRD

The Science Based Targets initiative published a new draft version of the Corporate Net Zero Standard in 2025. This draft is one of the most influential international frameworks for companies aiming to become climate neutral by 2050.

Scope 1 and 2
The draft raises the requirements for emission reduction and for the use of clean electricity towards 2040. This aligns the standard more clearly with global 1.5-degree scenarios.

Scope 3
Where the previous standard worked with fixed coverage percentages, the new draft introduces more flexibility. Large companies must formulate substantial Scope 3 targets, but are given more room to focus on the most material emission sources or on strategies such as green procurement. This helps companies with complex supply chains to steer more realistically yet ambitiously.

Offsets and BVCM
SBTi maintains the principle that offset use is not permitted to achieve science-based targets. Offsets are only allowed for residual emissions at the net zero moment and for Beyond Value Chain Mitigation. This aligns with the European course in which reduction always takes priority.

Governance and reporting
The draft requires companies to publish a transition plan within 12 months of validation. This reinforces the emphasis on data quality, traceability and consistent progress reporting. This increases coherence with the CSRD. Companies that properly set up their SBTi process automatically build a solid foundation for CSRD reporting and future assurance.

Conclusion

The combination of an ambitious EU target for 2040, a controlled role for international credits and a renewed SBTi standard shows that climate policy is becoming increasingly intertwined with business strategy, risk management and investment planning. Companies that now focus on clear roadmaps, consistent emission data, strong governance and a link between strategic goals and execution build a future-proof position.

The direction is clear. The transition is accelerating and organisations that are prepared will reap the benefits.

Sources

EU Commission 2040 Climate Target
Council of the EU and European Parliament political agreement 90 percent target
UNFCCC Article 6 guidance
EU ETS 2 documentation
SBTi Corporate Net Zero Standard Draft 2025 consultation versions