In late 2025, European policymakers agreed to include up to 5% of international credits toward a legally binding -90% net emissions reductions target by 2040, compared to a 1990 baseline. Yet how the EU will integrate those credits into its climate goals is highly dependent on a number of factors, all of which policymakers will need to consider when designing future policy proposals. To facilitate future discussions on what kind of credits the EU should trade, with whom, and under what conditions, we have outlined the factors policymakers will need to consider and how they will affect future policy design choices.

With all these questions remaining to be answered, the Commission is holding a public consultation about the topic until May 2026, which will then inform an upcoming impact assessment into possible roadmaps for international credits. To lend clarity to the consultation, we’ve created an International Credits Calculator to better understand the three main factors that the policymakers will need to consider: trade conditions and standards, portfolio composition, and investment needs. Initial analysis from the calculator provides key insights about the interplay of design choices of international credit sourcing policies and strategies:

Key insights

Our International Credits Calculator lets you determine the optimal policy conditions using international credits in the EU Climate Law

Outlining the variables at play

1. Prescribing a percent of international credits.

The European Climate Law (ECL) has set a legally binding target of 90% emissions reductions from 1990 levels. It now allows some flexibility in that up to 5% of those emissions reductions can come from the purchase of international credits. However, the portion of international credits remains undefined, and the EU could still decide for 0% contributions or fully rely on the maximum of 5% (meaning 85% of emissions reductions would be within the EU and international credits would be used to get from 85% to 90%).

There are many factors EU policymakers will need to consider in defining how many international credits it should purchase, and the decision will depend on the standard under which the EU chooses to operate, the level of ambition and how it defines that, and the total cost of domestic and international action. These factors and their ramifications are detailed below and can be compared in our calculator at the bottom of this page. For further info on the text agreed by the EU Commission, please see Annex A below.

2. Trade conditions and standards

The discussion of international credits centres around Article 6 of the UNFCCC Paris Agreement which regulates cooperation and trade between climate outcomes on the UN level. Importantly, this framework also links international carbon credits with other sustainable development and climate goals. After a decade of political negotiations, two main pathways for international credit transfers have been established. They both codify possible approaches to adaptation, climate finance contributions, shared efforts for achieving (conditional) NDCs, and overall mitigation of global emissions. In navigating the choice between Article 6 standards, the EU will need to act strategically in choosing which standard it uses, how much it contributes to global mitigation and adaptation, and with whom it partners if it wants to achieve its ambition to be a global climate leader. The details of these choices are outlined below.:

2.1 Selecting the standard

After a decade of political negotiations, two main standards have emerged, each with different rules around credit qualities and the contribution of a share of proceeds (SOP) to global adaptation, administrative costs, and contribution to ‘overall mitigation of global emissions’ (OMGE).

• Article 6.2 allows two parties to agree bilaterally to trade credits in line with UN guidance, leaving the integrity of credits at the liberty of the agreeing parties. Regarding credit integrity, the EU Climate Law sets Article 6.4 as a benchmark.
• Article 6.4: Paris Agreement Crediting Mechanism (PACM) is a centrally UN-administered market with conservative measurements of integrity. It also establishes a minimum 5% SOP for adaptation and 2% for OMGE.

2.2 Allocating SOP and OMGE

Both Article 6.2 and PACM have different approaches to allocating a share of credits to other objectives, namely contributions to the global adaptation fund via the so called “Share of Proceeds” (SOP) as well as contributions to overall mitigations for global emissions (OMGE).

• Article 6.2 does not lay out specific minimums for SOP. The ECL is unclear on exact quantities, but a 5% SOP is generally considered a minimum based in 6.4 as a benchmark, with some experts arguing for up to 20% split evenly between SOP and OMGE contributions.
• PACM establishes a minimum 5% SOP for adaptation and another 2% for OMGE.

2.3 Defining the share of mitigation benefits shared with the host country

The EU must determine with whom and under what conditions it engages in international climate transactions. For their NDCs, most countries have stated that they will rely on cooperation, and higher ambition targets are oftentimes conditional on receiving international climate finance. Europe wants to remain a climate leader and is conscious of its historical responsibilities. So, when purchasing credits, the EU could ensure that a share of the mitigation benefits remain with the host country. In this regard, the ECL does lay out some rules for potential partnerships:

• Countries must be signed up to the Paris Agreement and must be committed to the same climate objectives. Although it ensures shared ambition, this stipulation could lower the amount of available credits and potentially increase the cost.
• The EU should strive for ‘high ambition’ regarding the sharing of mitigation benefits according to the agreed ECL. In addition to direct climate finance contributions as it has done in the past, the EU could co-opt Article 6 instead. For example, in a higher ambition scenario, the EU would buy 100% of a country’s credits, but would use only 70% in its own accounting, with the remaining 30% used for both the country’s NDCs and the EU’s climate finance goals. However, clear attribution to either climate finance (no transfer of carbon credits) or carbon finance (transfer of a carbon credit) will be important in this regard.

With these factors in mind, it will be up to the EU to define what “ambition” means in the ECL and what percentage it allocates to host countries.

2.4 Determining the number of credits

The standard chosen, the contributions to SOP and OMGE, and the sharing of mitigation benefits will therefore all play a role in establishing the total percent of international credits the EU finances. For example, if the EU aims for 3% of international credits accounted for in its 2040 target, depending on the trade standards and conditions, it could result in investments above 5% of its 1990 emissions (Figure 1).

Figure 1 illustratively shows the volume of international credits the EU would need to finance to retain credits equivalent to 3% of its 1990 emissions. The dark grey bar indicates the volume of credits the EU retains (i.e., the full 3% target). The subsequent blue stacked bars show the larger volume that must be financed under different trade-standard and climate-diplomacy assumptions that would each reduce the share of credits the EU can ultimately account for in its own inventory. Under PACM, for instance, minimally 7% of credits are reserved for other objectives, so the EU must finance more than 3% to retain the same amount. There have also been calls for substantially higher shares of credits to be reserved for adaptation, overall mitigation of global emissions, or shared with host countries—potentially up to 50% (Schneider et al. 2025). Under such assumptions, retaining credits equivalent to 3% could require financing above 5% of 1990 emissions. The provisional ECL agreement only states “high ambition” concerning the above discussed points, and the number of credits will ultimately be determined by how the EU interprets that term.

Understanding how many credits the EU will need is important, as it is not yet clear if there will be enough high-quality credits in future since the EU is limited to high integrity credits with ambition-aligned partners. Decisions for bilateral climate agreements therefore bear important implications and should not be seen as marginal tweaks, but core design features. The European ambition so far reflected in the provisional agreement has positive aspects, as high ambition in trade conditions should be spurring increased climate action overall.

3. Defining the portfolio and cost of credits

As seen above, the EU The EU is holding itself up to certain standards for purchasing credits, ensuring they originate from countries with similar climate ambitions. Yet the type of credits the EU purchases, not just the quality, also reflects its ambitions. With targeted cooperation for high-quality emissions reductions credits, the EU faces tangible opportunities for emissions reductions globally. International credits present a way to heavily front-load near term emissions reductions abroad. But it’s not just about emissions reductions. Along with other countries in the Paris Agreement, the EU has a net-zero target and net-negative ambitions thereafter; carbon removal projects are an essential condition of reaching net-zero and maintaining a net-negative emissions balance. Allocating a share of high-quality carbon removal projects in its portfolio therefore becomes a key design choice for Europe. The question is therefore, not whether, but how many carbon removal credits to include.

Including carbon removal credits can also safeguard against trading low-effort mitigation credits that are far better suited for national NDCs, instead favouring an increasing reliance on carbon removal credits over time. Following on from India’s example of deeming cookstove and forestry projects ineligible for Article 6 transactions, countries should instead use these types of credits as part of their national accounting. Future trading partners are likely to continue limiting the types and amount of emissions reduction efforts they grant for external NDCs, as their own NDCs are set to become ever more demanding. Therefore, increasing the amount of carbon removal credits in Europe’s portfolio over time will allow Europe to scale such projects both at home and abroad, an action Switzerland has already pioneered in its Net Zero Roadmap.

Fine-tuning the composition of any European portfolio of international credits emerges as a key policy design choice. It is likely to respond to varied strategic considerations that could change over time. Therefore, we suggest careful management with a dynamically adaptable framework and clearly assigned responsibilities to reflect strategic considerations. Europe must remain conscious of its net-negative ambitions post 2050 and ensure they are front and centre in deciding its portfolio composition. If done right, Europe will be creating long lasting win-win-win situations, where Europe, the trading partner countries, as well as overall global climate ambition are all strengthened.

4. Investments needs for climate (in)action

The debate on international credits operates under the presumption that financing projects abroad is cheaper than domestic action. But a better understanding of the trade-offs between the cost of international credits and domestic mitigation needs can call this presumption into question.

4.1 Benchmarking the cost of domestic action

As a baseline, it’s important to consider the scenario where no international credits are purchased and instead all mitigation actions are domestic. As it nears 90% emissions reductions, the EU is left with the emissions that are the hardest to abate, those that present novel challenges in sectors such as steel, chemicals, cement or transport, and require higher costs than previous emissions reduction efforts in the energy transition.

In a 2024 report, the Commission found that if it only relied on domestic action, reaching between 78-92% emissions reductions would have a marginal investment cost between €150-340/tonne. Interpolating these costs per tonne to the 85-90% range yields a €220/tonne investment estimate if the EU were to rely solely on domestic action (including both carbon removal and emissions reductions) with no international credits. Comparing the cost of domestic action provides an important counterpart to the cost of international credits when comparing policy design choices.

4.2 Estimating the investment cost of international credits

The cost of international credits is highly dependent on the portfolio composition for several reasons;

1. more carbon removal means higher (short-term) costs;
2. the cost of international emissions reductions will co-depend on available credits;
3. the availability of international credits is uncertain with so many other countries, including the host country, interested in using them for their own efforts.

As established in section 3, reaching the EUs targets will require a portfolio of both emissions reductions and carbon removal credits, but it is important to provide rough estimates as to how much each of these types of credits will cost. Based on the cost references below, the international credit calculator estimates total investment needs and how these affect overall international credit valuations.

4.2.1  Emissions reductions credits

There have been very few emissions reductions (ER) project credits traded under Article 6 to date; most have been purchased by Switzerland at an average price of more than €25/tonne to be delivered between 2022 and 2030. Similar transactions by Singapore ranged from €15-35/tonne and CORSIA (the UN’s international aviation carbon market) ranged upwards of €15/tonne. These prices are far higher than those observed in the Voluntary Carbon Market (VCM) and across global carbon markets with prices currently around €4/tonne. Looking at the higher level of stringency required for Article 6 compatible projects, it’s no surprise that international carbon reduction credits are costlier than conventional carbon credits, due to their higher integrity.

4.2.2 Carbon dioxide removal credits

There have yet to be any carbon dioxide removal (CDR) credits purchased via Article 6, so price estimations can only be derived from CDR.fyi, the global aggregator and publisher of all current CDR transactions with prices hovering between €100-700/tonne in 2025. Although prices are likely to come down between 2036-2040 as these technologies go down the cost-curve, durable CDR credits, on average, will likely remain costlier than ER credits until 2040.

Comparison: the cost of climate inaction

This discussion has been based on the underlying premise that the EU will need to invest in climate action for a number of reasons, including the cost of inaction, which according to research is consistently more expensive than investing early. Inaction results in higher public spending later in response to crises, more social compensation, regional support schemes and so on. Policy uncertainty can cause a more disorderly transition toward a climate-friendly economy with greater loss in investments and a worse economic outlook. By contrast, early, planned investment consistently shows lower long-term costs. The question of purchasing up to 5% international credits thus isn’t about “whether” but “where and how,” so that it is approached dynamically and does not deprioritise domestic action in sectors where domestic abatement cost is competitive; for example, if domestic action turns out to be cheaper, policymakers could shift the focus away from international credits or vice versa.

What can we learn from the interplay of variables?

The result of the international credit calculations show that international credits are not necessarily cheaper than domestic action. The relative cost of using international credits to get Europe’s ambition from 85% to 90% depends on trade conditions, standards, total volume needed, portfolio composition, and assumed future cost of credits, along with a baseline understanding of what it would cost domestically. Our International Credits Calculator has synthesised the interplay of these factors to explore some of the trade-offs:

Domestic action vs international CDR and ER credits

The balance between domestic action, international emissions reductions (ER), and international carbon removal (CDR) credits will also create important trade-offs for the overall investment cost to the EU. A strategic CDR component is important in any portfolio (including domestically), but at the same time higher near-term costs are typically associated with CDR. How much higher this cost will be is sensitive to future price variations and the EU’s portfolio composition. But it also needs to be compared against the investment cost for domestic action. Figure 2 explores the impact of varying the portfolio of international credits and the investment costs of international credits and domestic action. The comparison shows us that key policy design choices, e.g. the trade considerations, will define the overall cost for the EU of reaching its climate target.

Figure 2 shows the European investment cost to obtain international credits equivalent to 3% of its 1990 emissions considering different portfolios of mitigation strategies and prices for international credits and domestic action in EUR/tonne of CO₂ mitigated. The international credits could be supplied through either high-quality emissions-reduction (ER) units or carbon-dioxide removal (CDR) units. The left three bars vary in their investment costs, and the right three bars vary in their split between international credits coming from CDR or ER. The two starred scenarios have an identical policy design. All the hypothetical scenarios follow PACM, where 7% of credits are accounted for outside the EU, meaning the EU must finance more than 3% to retain the same amount.  

Cost vs ambition

Our analysis of different scenarios shows that international credits are not always cheaper. The trade negotiations that will form the foundation of these credit purchases may preference Europe’s ambition for climate leadership or a longer time horizon, rather than pure cost. Figure 3 shows that in three illustrative scenarios (1%, 3%, or 5% of international credits) depending on the trade standards and conditions, the EU’s investments costs may be higher – as demonstrated in a case where the EU finances more than what is accounted for in its own inventories for the sake of a more ambitious agreement. For example, 3% of international credits through higher ambition trade agreements could cost more than 5% with lower ambition trade agreements.

Figure 3 shows the costs of achieving a 90% reduction target with different contributions of 1%, 3%, and 5% international credits, here presented as clusters of bars, each with different possible trade standards and diplomacy. The international credits could be supplied through either high-quality emissions-reduction units or carbon-dioxide removal (CDR) units (illustrated here with a hypothetical 75/25 split). The same exemplary price points for domestic action, emissions reductions and carbon dioxide removal are applied across the scenarios (respectively 150, 100 and 350 EUR/tonne). The individual bars show the resulting costs if 1) no additional international credits are accounted for outside the EU; 2) if the PACM is followed, where minimally 7% of credits are accounted for outside the EU; and 3) 50% of the international credits are accounted for outside the EU, following calls for ambitious climate financing and mitigation benefit sharing.

Understanding the consequences of policy decisions

Relying on international credits for its climate goal could be advantageous for the EU. Even with a low cost of domestic action (€150/t), international emissions reductions could be cheaper and could help keep the costs of 1%, 3%, and 5% roughly level (see Figure 3). It’s only when the EU contributes a larger percentage of credits to non-European inventories that costs begin to increase, especially for the 5% scenario, where the impact of trade conditions will become key. Although these trade agreements may lead to new partnerships and increased global ambition, as ambition increases, so too will the costs of relying on international credits. Additionally, by investing in international credits, the EU would benefit less from the economic and social opportunities that accompany the domestic green transition. Europe must have a good grasp of these ramifications in its policy design, something we hope to facilitate with our International Credits Calculator. Importantly, higher investment costs must not only be understood negatively, as they allow for increased climate ambition overall.

In February 2026, the Commission opened a public consultation to inform its impact assessment on the use of international credits in the post 2030 policy framework, due in Q4 2026. The debate surrounding the passing of the ECL resulted in ambitious guidelines around the quality of international credits available to the EU. Yet this ambition is not restricted only to quality but also to the trade agreements and climate strategy the EU uses to achieve its goals.

Given Europe’s major role in international carbon markets, 2026 will be a pivotal year for carbon markets under Article 6. But from this new ECL mandate, actual policy design questions on international carbon credits are only starting to be uncovered. Deliberate European efforts and a strategic approach to international carbon credits are critical to the success of climate targets reliant on international carbon credits.

The international credits calculator

Further reading

By the book: How effective are Article 6 carbon market rules?

Carbon Market Watch

Annex A

The provisional agreement of the European Climate Law text

• starting from 2036, an adequate contribution towards the 2040 climate target of high-quality international credits under Article 6 of the Paris Agreement of up to 5% of 1990 EU net emissions, corresponding to a domestic reduction of net greenhouse gas emissions by 85% compared to 1990 levels by 2040, in a way that is both ambitious and cost-efficient, supporting the EU and third countries in achieving net greenhouse gas reduction trajectories compatible with the Paris Agreement objective to hold the increase in the global average temperature to well below 2 °C and pursue efforts to limit the temperature increase to 1,5 °C above pre-industrial levels ensuring the environmental integrity of these credits, while promoting the EU’s technological leadership; a pilot period to initiate a high-quality and high-integrity international credit market may be considered for the period 2031-2035; the origin, quality criteria and other conditions concerning the acquisition and use of any such credits shall be regulated in Union law to ensure that they are based on credible and transformative activities in partner countries with the aim of achieving climate targets and policies compatible with the long-term temperature goal in the Paris Agreement and are subject to robust safeguards, including ensuring integrity, avoidance of double counting, additionality, permanence, transparent governance, strong monitoring, reporting and verification methodologies, as well as economic, social and environmental co-benefits and human rights safeguards, and high ambition for the share of proceeds for adaptation and sharing of mitigation benefits with concerned countries; when establishing the quality criteria, the Commission shall consider where appropriate complementing the criteria laid down under Article 6.4 of the Paris Agreement to ensure the respect of these safeguards and the highest quality of international credits, in particular with regard to permanence and human rights;

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