The European Union (EU) banking industry is urging policymakers to impose strict limits on the use of international carbon credits, arguing they should play only a narrow role in the bloc’s long-term climate strategy, the European Banking Federation (EBF) said in a statement.
The call comes in response to the European Commission’s consultation on the EU’s post-2030 climate framework, which examined whether carbon credits generated outside the bloc could count toward future emissions targets, including the EU’s 2040 climate goal.
In its submission, the EBF said international credits could help direct investment into global emissions-reduction projects and lower compliance costs for companies under decarbonization pressure. Still, the federation stressed that overseas credits must not displace emissions cuts within Europe.
“Emission reduction must always take priority,” the group said, adding that credits should only address residual emissions that cannot be eliminated internally.
According to the EBF, international credits could complement existing climate tools if carefully integrated into the EU framework. However, it cautioned that excessive dependence on external credits could undermine the bloc’s climate ambitions.
Carbon Gap: binding targets and limits on flexibility
Meanwhile, climate policy think tank Carbon Gap warned that international carbon credits should only play a tightly controlled role in the EU’s future climate architecture. The group argued that flexibility mechanisms must be capped, temporary, and tied to measurable progress on emissions reductions. Without strict safeguards, Carbon Gap said governments could delay domestic action by relying on accounting mechanisms instead of delivering real emissions cuts.
The organization also challenged the assumption that international credits will always be cheaper than cutting emissions within Europe. According to its analysis, the EU should prepare to meet its 2040 target primarily through domestic measures, using international credits only as a limited backstop or to push climate ambition beyond the bloc’s baseline target.
“You cannot build a climate framework out of safety valves,” said Anna Costova, Associate Policy Lead at Carbon Gap. She added that flexibility measures should only come into play after the EU establishes “binding national targets for emissions cuts, land sinks and permanent removals.”
Carbon Gap also stressed that carbon dioxide removal (CDR) will be essential to meeting the EU’s 2040 climate objective. The group said the bloc will need a rapid scale-up of permanent removals alongside deep emissions cuts, noting that deployment currently starts from a near-zero base across much of Europe.
Citing modelling developed with Finnish research institute VTT, Carbon Gap said the EU may require at least 100 million tonnes of permanent carbon removals annually to meet a 90% emissions-reduction target domestically. The organization argued these volumes are unlikely to materialize without separate binding national targets for removals, combined with clearer incentives and compliance-driven demand.
IETA and NGOs: building a workable credit system
At the same time, International Emissions Trading Association (IETA) backed the selective use of high-quality international credits alongside domestic climate action. The association said robust monitoring and verification systems, aligned with Article 6 of the Paris Agreement, would be essential to maintaining environmental credibility.
IETA also warned against creating overly restrictive EU-specific rules that could fragment global carbon markets. Instead, it called for predictable governance frameworks and flexible use of credits across EU climate instruments, including the ETS, Effort Sharing Regulation, and LULUCF framework.
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Environmental groups also weighed in on the debate. The Environmental Defense Fund and The Nature Conservancy released separate analyses (Buying the 5%: Funding, Governance and Market Design for the EU’s International Credit Purchases and International credits in the EU: credit quality criteria and implications for the EU’s purchasing strategy) outlining safeguards for any future EU use of international carbon credits. The organizations said large-scale credit purchases would require long-term funding commitments, strong governance, and strict quality standards to ensure environmental integrity.
“International credits are not something the EU can simply buy off the shelf when it needs them,” said István Bart, Senior Director for Carbon Pricing at Environmental Defense Fund, warning that developing a reliable supply of high-integrity credits could take years.
Rebecca Humphries, Head of Climate Policy Europe at The Nature Conservancy, said a credible framework should strengthen climate ambition while also delivering biodiversity and socio-economic benefits in partner countries.
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