EU Article 6 credit purchases risk rewarding climate laggards and penalising early movers, study warns
By Article 6 Network
A think tank argues that the EU should pool its international carbon credit purchases in a central reserve and allocate them on merit, rather than assigning them in advance to member states or sectors. It warns that pre-assignment could reward countries and industries that lag on domestic action and penalise early movers. The debate comes as the EU designs how up to 5% of its 2040 target will be met with Article 6 credits, which could make Europe one of the largest future buyers.
The study warns that dividing up the EU’s planned purchases of international credits in advance among countries or sectors could give the most credits to those that have done least to cut emissions at home. It instead proposes a central reserve, with credits released based on merit.
The EU has already set the legal basis for buying credits. Regulation (EU) 2026/667, adopted in March 2026, amended the European Climate Law. From 2036, high-quality Article 6 credits may contribute up to 5% of 1990 EU net emissions towards the 2040 target of a 90% net reduction, with a pilot phase from 2031. The political agreement also allows member states to use a possible additional 5% of credits towards national objectives between 2036 and 2040. In its proposed EU ETS review, the Commission would be authorised to buy up to 260 million credits for ETS sectors between 2036 and 2040. These would not become compliance units: operators would still surrender EU allowances only.
The centralised approach has wide support among analysts. Öko-Institut has proposed that credits be bought mainly through a central purchasing facility, with part held as a safety reserve against uncertainty in the land-use sector. Clean Air Task Force analysis on centralised purchasing has warned of significant risks of over-reliance on credits and under-delivery, citing the EU’s quality and strategic criteria, Article 6 trading conditions and long project lead times. The European Commission is expected to propose a legal framework for using international credits by the end of 2026.
Signals to watch
- A major new sovereign buyer: The EU’s 5% allowance amounts to roughly 230–260 million tonnes. That would make the EU one of the largest Article 6 buyers from 2036, alongside Switzerland, Japan, Singapore, Norway and Sweden. Host countries and developers should start planning for EU-grade supply now, given lead times of up to four years.
- Allocation design shapes incentives: Whether credits go into a central reserve allocated on merit or are pre-assigned to member states and sectors will decide whether Article 6 complements domestic action or replaces it. Merit-based release protects early movers and reduces the risk of weaker domestic effort.
- Commission proposal at end-2026: The legal framework on credit use, covering quality criteria, eligible project types, host-country conditions and governance of any central facility, will be the key document for suppliers. Watch for positive or negative lists, requirements for corresponding adjustments and preferences for removals.
- EU quality standards as a global benchmark: EU criteria are likely to become a reference point for other buyers and for corporate claims. Credits meeting EU standards could command a premium, while those that fall short may lose access to the largest compliance demand.
- Timing and banking constraints: If only credits issued between 2036 and 2040 can be used in that period, banking will be limited, which increases delivery risk. Suppliers should watch the vintage rules closely and set up forward contracts accordingly.
