EU Faces 2036 Deadline for 260-Million-Credit Carbon Facility

The European Union could buy as many as 260 million international carbon credits to serve the EU Emissions Trading System between 2036 and 2040, under reforms now moving through Brussels. BeZero Carbon, in a report published this week, says the bloc must legislate and build a project pipeline years before the first purchase.

The European Commission is expected to present legislation governing the centralized procurement facility in December. Under the proposed ETS reforms, up to 260 million allowances could finance purchases of an equivalent volume of international credits across the 2036–2040 window.

The report's central argument is blunt. Future demand alone will not bring enough projects to market.

Why does the facility need early money?

Developers face project development costs, funding requirements and approval procedures under Article 6 of the Paris Agreement well before any credit changes hands. BeZero argues they need early financial commitments to carry projects through that gap.

The recommended toolkit includes:

• Forward purchase agreements
• Advance payments
• Guarantees
• Project-preparation support

Each instrument, the report says, should transfer risk from developers to the facility at the stage where projects most often fail: before registration and issuance.

What would the facility actually do?

BeZero assigns the proposed body three core responsibilities:

1. Build a supply pipeline between 2028 and 2035
2. Purchase credits for use from 2036 to 2040
3. Manage the resulting portfolio after acquisition

The sequencing matters. Pipeline construction would start roughly three years after the expected December legislation, leaving a seven-year window before the purchase phase opens.

How strict should eligibility be?

The report recommends straightforward entry rules. Credits should align with methodologies under the Paris Agreement Crediting Mechanism (PACM) or the Core Carbon Principles (CCPs), alongside corresponding adjustments by host countries.

Broad criteria, however, are not enough. BeZero calls for project-level due diligence covering:

• Additionality
• Carbon accounting
• Permanence
• Potential harm to communities and the environment
• Implications for host countries' climate targets

Partner-country requirements should cover climate reporting and Article 6 governance, according to the report. Procurement itself should stay flexible, spanning competitive tenders, auctions and negotiated transactions.

New institution or existing agencies?

BeZero's answer is existing institutions. The facility should use EU agencies and financial institutions already in place rather than build an entirely new body.

External specialists could provide technical assessments, insurance and portfolio-management services. Public authorities would retain final responsibility and oversight.

Legislation, the report says, should establish transparent decision-making, accountability and reporting requirements. It also recommends assessing the facility's contribution to European competitiveness across its portfolio, including through demand for European technology, goods and services.

The competitive dimension links the facility to a wider Brussels debate on industrial policy and the ETS. The Commission has resisted calls for deeper ETS price intervention, and the credit facility gives the bloc a lever to support European suppliers without direct market management.

What happens next?

The December legislative proposal is the milestone. Its treatment of forward purchasing, eligibility criteria and institutional design will determine whether a project pipeline exists when the 2036 purchase window opens.

Two deadlines now frame the file: the Commission's December proposal and the 2028 start of pipeline development that BeZero's timetable assumes. Miss the second, and the 260-million-credit target for 2036–2040 becomes a procurement problem rather than a policy choice.