Tomorrow’s Environment Council will show if EU member states are ready to agree on a 2040 emission reduction target that can be put into the European Climate Law. To muster a qualified majority will require at least 15 member states, whose combined population must represent at least 65% of the EU total.

The right amount of flexibility

Last Friday (31 October), member states’ ambassadors failed to agree on a Danish compromise text on a 2040 emission reduction target of 90%. Copenhagen’s willingness to increase the use of international credits beyond the original proposal of 3% has not been enough to convince the holdouts, nor the recent idea of a revision clause that would allow for downscaling the target at a later point in time.

Back in September, Poland circulated a non-paper that was referred to in the media last week, arguing that up to 10% of the target could be accounted for using high-quality international credits issued under Article 6 of the Paris Agreement. Warsaw wants such credits to be available to emitters regulated under the EU ETS, as well as to member states’ governments for reaching sub-targets in sectors not covered by the EU ETS. The Commission and the Danish presidency have been clear that they do not want to open for credits in the ETS.

Last week, France presented a non-paper proposing to raise the default credit share limit to 5%, which seems intended to be a middle ground between the original proposal of 3% and the Polish proposal of 10%.

Paris also wants to tweak the target review clause proposed last week by the Danish presidency, to explicitly allow for the credit limit to be raised to 8%, if the domestic carbon absorption capacity (natural and technological) fails to deliver as hoped. Paris reportedly sees this as a landing zone that should be acceptable to most countries.

Over the weekend, Denmark circulated a slightly amended text that will be the basis for tomorrow’s discussions among environment ministers.

Can the opponents manage a blocking minority?

The Danish presidency and the Commission obviously prefer to find a solution acceptable to all member states, including the eastern countries that are most strongly opposing a new ambitious climate target. Copenhagen will go to great lengths to be able to present a unanimously approved “fair compromise” that takes into account most concerns. That is indeed why Denmark agreed to postpone the 2040 vote from the environment council in September and lift the topic to be discussed (briefly) by heads of state in the European Council on 23 October.

Yet there is also a sense of urgency to agree on a 2040 target to set a 2035 target to be presented at the COP30 summit, whose high-level session starts on 6 November (Thursday). Recently, the Danish presidency has signalled that it is ready to put the 2040 target to a vote on 4 November.

If, for the sake of illustration, we assume that the so-called Visegrad countries refuse a compromise along the lines of the latest Danish or French proposals, we could get into a situation in which Poland (8.2% of the EU population), Czechia (2.41%), Hungary (2.14%), and Slovakia (1.21%) vote against. Without additional support, they would be unable to form a blocking minority, holding only 14% of the total population.

For more details and background, see our analysis ahead of the European Council meeting and our latest weekly policy comment.

How to watch

The Environment Council meeting on Tuesday, 4 November, starts at 10:00. The livecast page lists a public session at 10:10, another at 14:00, followed by a press conference, to be confirmed.

A new failure to reach a decision would send a bearish signal for EUA prices, as it would be seen as increasing the likelihood of a less ambitious 2040 climate target.

Conversely, if the Council does agree on a 90% target with around 5% share of international credits and a review clause with strictly defined triggers, we might see a bullish reaction to the mere adoption of a target, despite a higher share of international credits lowering the overall emission reduction burden in Europe.