Europe’s carbon credit purchases can raise global ambition, if the EU plays its hand realistically

The final paper in EDF’s series on international carbon credits in the EU looks at the diplomacy behind Europe’s future credit purchases. Its advice: be realistic about leverage, start simple and build deeper partnerships over time. 

Europe is about to become one of the world’s biggest government buyers of carbon credits – and the rules for how it buys them are being written now. 

The European Union has a 2040 target of cutting net emissions 90% and at least 85% of that must come from cuts at home. But starting in 2036, up to 5% can come from high-quality international credits under Article 6 of the Paris Agreement, with a possible pilot from 2031. In July, the European Commission proposed a central facility to buy up to 260 million tons of these credits between 2036 and 2040. 

The next few weeks will shape what that buying looks like. At COP31 in Antalya, Türkiye, governments will debate how carbon markets should work under Article 6. By mid-December, the Commission is expected to publish its proposal on how the EU will use international credits. 

Most of the debate so far has been about how much to buy, how to pay and which credits qualify. Less attention has gone to a question that may matter just as much. Who will Europe buy from, and what can it ask of them in return? 

That is a diplomatic question. Credit purchases mean signing agreements with other governments. Done well, they could help partner countries cut more emissions, set stronger climate targets and see the Paris Agreement as an economic generator. Done badly, Europe could end up with a long list of agreements and very few credits. 

The last piece of the puzzle

Our new paper, International Credits in the EU: Opportunities for Climate Diplomacy, takes on that question. It is the final paper in EDF’s series, Importing international carbon credits to the EU: How to make it work? 

The series began in October 2025 with Strategic Choices & Practical Implementation. That paper showed how importing credits, done right, could keep Europe’s compliance costs manageable, protect its climate ambition and increase its influence in international climate policy. 

In May 2026, EDF and The Nature Conservancy released two more papers: 

• Buying the 5% looked at how purchases could be funded and governed, and what market design would send a credible signal to future suppliers. 

• Credit quality criteria and implications for the EU’s purchasing strategy looked at how the EU could define and protect credit quality. It recommended building on Article 6 and existing integrity frameworks rather than writing new rules from scratch. 

Together, those papers made one point clear. If Europe uses international credits, it needs clear rules, credible governance and strong quality safeguards. This final paper asks what Europe can achieve abroad once those foundations are in place. 

Be realistic about leverage

Europe’s credit budget will be significant, but its pull on large emitters will be limited. Take Indonesia, one of the largest potential sellers. Suppose the EU spends €20 billion on credits between 2036 and 2040, and Indonesia wins a fifth of it. That comes to about €0.8 billion a year, starting a decade from now. In 2024 alone, Indonesia received almost €8 billion in Chinese investment through the Belt and Road Initiative. 

Selling credits also has real costs for the seller. Under Article 6, every credit sold abroad must be subtracted from the seller’s own climate accounts. Add stringent conditions for domestic policy on top – designed to meet the European Climate Law’s credit criteria of Paris Agreement compatibility, additionality and permanence – and many large economies will simply look elsewhere. Europe has more sway with smaller countries. But a deal with a small country on strengthened domestic policy does less to cut global emissions. 

Don’t wait for the perfect partner

Few countries are large emitters with an ambitious climate plan, affordable credits to sell and a willingness to accept EU policy conditions. We call this the diplomatic trilemma.  

An EU framework that insists on all of it at once could leave Europe with few partners, or none. The opposite extreme doesn’t work either. Switzerland has signed about 20 Article 6 agreements since 2020 and has received about 14,000 credits so far. Singapore has signed 12 and has yet to receive any. It’s early days, but signatures alone don’t guarantee supply. 

Go wide first, then go deep

The paper proposes a two-stage approach. 

1. Simple agreements with many countries. These set the accounting rules and confirm which credit types are eligible, with few extra conditions. They give Europe a broad supply base. 

2. Deeper partnerships with the most promising countries. These combine climate policy commitments, development finance and large-scale crediting programs. 

Europe can anchor these in partnerships it already has, such as the new Clean Trade and Investment Partnerships. A public roadmap of what the EU expects from partners’ national climate plans could help countries see how to move from the first stage to the second. 

Think big on supply

Individual projects alone won’t deliver enough high-integrity credits at the scale Europe needs. The paper points to three larger-scale options: 

• buying allowances from emissions trading systems abroad that have binding caps 

• jurisdictional forest programs, such as those certified under ART-TREES 

• bilateral agreements on actual programs for decarbonization in countries that need financial support and capacity building to succeed with their clean energy transition. 

Crediting at this scale also helps with integrity. Counting reductions across a whole sector or jurisdiction makes it harder to credit emissions cuts that would have happened anyway. 

Set a clear test for host countries

The paper suggests three questions for deciding who Europe buys from: 

• Legal: Is the country eligible to trade under Article 6? 

• Policy: Is its national climate plan ambitious, and does selling credits help it meet that plan or make it harder? 

• Political: Is it a suitable partner for the EU? 

Team up with other buyers and use the whole toolbox

Europe plans to buy credits for five years: 2036 to 2040. That is too short a window to finance most projects, which deliver credits over 10 to 15 years or more. Shared quality standards with other buyers would give suppliers a bigger, longer-lasting market. The Open Coalition on Compliance Carbon Markets, which the EU co-chairs, is a natural forum for that work. 

Credit revenue is also only one of Europe’s tools. Its Carbon Border Adjustment Mechanism (CBAM), trade agreements, product rules and clean-industry partnerships may give it more influence over large emitters. Presented as one coherent offer, they can do far more together than credit purchases alone. 

A new idea: pay for future ambition

The paper also puts forward a new idea. There is a cost that today’s carbon accounting ignores. When a country sells credits now, it uses up some of its cheapest emissions reductions. That makes its own future targets harder and more expensive to hit. 

The paper proposes making part of a credit deal’s value depend on how ambitious each side’s next national climate plan is. These plans are known as nationally determined contributions (NDCs). The idea borrows from sustainability-linked bonds, like those Chile and Uruguay issued in 2022. Their interest rates rise or fall depending on whether climate targets are met. 

Applied to credits, it works both ways: 

• Host countries would be rewarded for raising targets in the sectors that generated the credits. 

• Buyers would pay more if credits start replacing their own domestic emissions cuts beyond an agreed limit. 

The paper sets out five ways to do this, from simple to complex: 

1. An escrow that holds 15–30% of the credit price until the host’s next NDC meets agreed criteria. 

2. An ambition-linked sovereign bond issued by the host and backed by the buyer. 

3. A buyer commitment to pay the host if the buyer overuses credits or misses its own domestic path. 

4. A reserve of credits the host keeps only if it meets its ambition goals. Otherwise they are canceled. 

5. A pooled facility run through a multilateral development bank, which spreads risk and acts as a neutral verifier. 

The timing matters. Countries are due to submit their next NDCs in 2030. Deals struck in the next few years will fall right in that window. 

Getting the design right, now

Europe’s credit purchases will be small next to its domestic climate effort. But the choices it makes in the coming months will shape markets far beyond its borders. They will signal what high-quality credits look like, who gets to sell them and what buyers owe in return. 

Progress beats perfection here. Europe can start with a workable system and strengthen it over time. That means simple agreements to get started, deeper partnerships where they can deliver, supply at real scale and payments that reward rising ambition. 

COP31 is a chance to test these ideas with partner countries. The Commission’s proposal in December is a chance to build them into law. Built this way, EU credit purchases could pay for ambition as well as tons. 

Read the full paper, and the rest of the series, at edf.org/international-credits-eu.