Europe agrees to cut emissions 90% by 2040

The European Union has agreed to a legally binding climate target to cut emissions 90% by 2040, even as it pushes back a planned critical emissions trading scheme.

The European Parliament and EU Member States came to a provisional agreement on the target and an amendment of the EU Climate Law on Tuesday night.

“Today, the EU is showing our strong commitment to climate action and the Paris Agreement. One month after COP30, we have turned our words into action – with a legally binding target of 90% emissions reduction by 2040,” EU chief Ursula von der Leyen said in a statement announcing the deal on Wednesday.

She added that the agreement represents a “pragmatic and flexible plan” to make the clean transition more competitive.

“The fact that this new target is legally binding is commendable, as it cements the EU’s ambition to achieve net zero by 2050,” Hortense Bioy, who heads up sustainable investing research for Morningstar Sustainalytics, told CNBC.

It is hot on the heels of the 30th Conference of the Parties (COP), which saw world leaders gather at the edge of the Brazilian Amazon to decide on how to implement climate targets. Brazil’s COP30 presidency pushed through a compromised deal to boost climate finance for developing nations but the text did not include references to fossil fuels.

No official U.S. delegates attended COP30 marking an unprecedented absence of U.S. officials at the conference. It comes after Trump at the start of this year withdrew the country from the Paris Agreement to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels.

“Today’s news provides the long-term certainty that investors needed to continue deploying capital into net zero technology at scale, giving Europe the opportunity to become the global leader in the sector while others retreat,” Louis Fearn, principal at Jaguar Land Rover’s corporate venture capital arm InMotion Ventures, told CNBC.

“The 2040 target will accelerate innovation across critical supply chains, from solutions for rare earth materials to next-generation energy storage, as businesses now have clear visibility on where regulation is heading. The combination of regulatory certainty and Europe’s commitment to maintaining competitiveness through this transition provides the ideal backdrop for startups to thrive, especially those that cut emissions while delivering better performance at lower costs,” he said.

Bastian Gierull, the chief executive of renewables-focused utility Octopus Energy Germany, added it’s important to “recognise that climate protection is not a burden, it is a strategic investment.”

Climate action is a driver of economic growth, independence, job creation and innovation, he said, noting the commitment “shows we can fight climate change while keeping Europe competitive.”