Turning the screws: the 2040 climate target is set to further tighten supply in Europe’s carbon market

Brussels eyes a net 90% emission reduction target for 2040. For the EU ETS this implies a more ambitious cap reduction than what would follow from simply extrapolating the current supply trajectory of emissions allowances (EUAs). Once lawmakers have decided, the 2040 target will be set into the Climate Law. The upcoming European Parliament elections in June is likely to delay the legislative process, which might easily drag into 2025.