International carbon credits in the EU : ensuring flexibility without undermining credibility

The EU is currently reviewing its post-2030 climate policy framework, including the potential use of international carbon credits, equivalent to up to 5% of 1990-level emissions, towards its 2040 climate target. With such credits now embedded in the emerging framework, this paper examines how their governance can be designed to mitigate risks to environmental integrity, fairness, and domestic mitigation incentives, while preserving the overall credibility of EU climate policy. It argues that the impact of international credits will depend critically on key design choices, including who is allowed to procure and use them, how they are allocated, and the timing of their use. To address these challenges, the paper calls for a cautious and well-designed approach that restricts access to credits to avoid undermining domestic decarbonisation incentives, establishes strong and centralised governance structures to ensure environmental integrity, and implements targeted allocation mechanisms that support equitable burden-sharing and policy coherence across EU climate instruments