Climate finance gaps in the global south are widening, as evidenced by tensions at COP29 in Baku over the new global target. Conventional channels have not delivered at the pace or scale required: the $100bn pledge arrived too late, and prospects are dimming further with shifting US policy, weakening of USAID and strained budgets across donor countries.
Against this backdrop it is understandable developing nations fear new approaches. But if designed with integrity and equity in mind – making sure the errors of the past are not revisited – carbon credits can unlock additional flows for high-impact projects in economically poorer countries, delivering benefits for people on the ground while reinforcing global climate efforts.
Critically, through this proposal, the EU is learning from past mistakes. The plan keeps international credits out of the EU Emissions Trading System, avoiding the risk of depressing carbon prices for European industry. Instead, Brussels will create a dedicated, tightly regulated framework with “robust and high-integrity criteria and standards” governing credit quality, origin, timing and use.
The intention is clear: this is not a shortcut to avoid cutting emissions at home. It is a parallel channel to mobilise capital for high-impact climate solutions abroad – without diluting the EU’s domestic ambition, nor the essential domestic investment in the energy transition that will help drive the EU’s future competitiveness.
Rebuilding trust in international carbon credits is essential and ongoing. Too often in the past, projects failed to deliver real or additional climate benefits. The EU can change that by applying strict environmental integrity checks, aligning with initiatives like the Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles.
Quality is only part of the equation. High-integrity credits should also deliver benefit sharing: a fair portion of revenue flowing to local communities, with transparent reporting on social and economic outcomes. This not only strengthens the legitimacy of the market but also helps to ensures climate finance supports a just transition.
Finally, Paris Agreement alignment must be non-negotiable. Credits should fund activities that go beyond a host country’s existing national climate commitments – ensuring the EU’s investment delivers a genuine net benefit to the planet.
Opportunity And Risk
Used well, the EU’s re-entry into the international carbon market could set a new global benchmark for credibility, transparency and impact. It could spur private investment, stabilise demand, and expand the pipeline of high-quality projects.
It could also demonstrate that climate cooperation works in practice: that a wealthy bloc can meet its own targets while supporting development, resilience and biodiversity in countries on the frontlines of climate change.
The risks are real. Poorly designed criteria could open the door to low-integrity credits; opaque benefit sharing could undermine trust; and public perception could harden around the idea that Europe is “buying” its way out of climate responsibility. That is why transparency, independent verification, and regular public reporting must be built into the system from the start.
If anything, this mechanism – limited, regulated, and delayed until 2036 – could prove to be one of the most impactful tools in the EU’s climate arsenal.
A Model For The World
The use of carbon credits has been debated for years, but strong governance and integrity standards can ensure they complement rather than replace direct decarbonisation. If decarbonisation is our shared goal, pragmatism means keeping every credible option on the table to get there together.
If Europe gets this right – building a high-integrity, high-impact market that funds solutions where they are most needed – it won’t just meet its own targets. It will leave behind a stronger, more credible global carbon market, capable of helping the world decarbonise faster.
