The European Union will need to begin developing a pipeline of international carbon credit projects years before its proposed procurement programme starts, according to a report by carbon ratings company BeZero Carbon. The report calls for early financial commitments, robust project-level assessments and long-term portfolio oversight to support the planned facility.
The European Commission is expected to present legislation on the use of international carbon credits in the fourth quarter of 2026. Under the proposed changes to the EU Emissions Trading System (EU ETS), a central procurement facility could purchase up to 260 million tonnes (Mt) of international carbon credits for the 2036–2040 period.
The purchases would be financed through the auctioning of up to 260 million EU ETS allowances, with the proceeds allocated to the facility. The proposed mechanism is intended to allow qualifying international credits to contribute to the EU’s climate target while complementing domestic emissions reductions.
In its report, The Legislative Foundations of an Effective EU International Credit Procurement Facility, published on 29 October 2026, BeZero argues that the EU should establish the facility’s legal and operational framework well ahead of the purchasing period.
Early financing needed to develop credit supply
BeZero says the facility cannot depend on future demand alone to generate sufficient project supply. Developers need access to capital during the early stages of project development, when they face costs associated with feasibility studies, project preparation, financing and approval procedures under Article 6 of the Paris Agreement.
The report recommends several measures to address this funding gap, including forward purchase agreements, advance payments, guarantees and project-preparation support. These mechanisms could give developers greater certainty over future demand and help projects secure the financing needed to reach implementation.
This approach would require the EU to establish procurement rules and project assessment procedures before the main purchasing phase begins.
BeZero calls for stronger eligibility and project-level checks
The report recommends clear eligibility requirements for credits entering the facility. Potential benchmarks include methodologies under the Paris Agreement Crediting Mechanism (PACM) and alignment with the Core Carbon Principles (CCPs), alongside corresponding adjustments by host countries to address the risk of double counting.
However, BeZero argues that broad eligibility criteria should not replace project-specific due diligence. Assessments should examine additionality, carbon accounting, permanence and the possibility of adverse effects on local communities and the environment.
The report also highlights the need to consider how projects affect host countries’ own climate targets. Partner-country requirements should cover climate reporting and the governance arrangements needed to implement Article 6 of the Paris Agreement.
For procurement, BeZero recommends allowing different transaction methods, including competitive tenders, auctions and negotiated agreements. A flexible approach could help the facility engage with projects at different stages of development and across different markets.
Existing EU institutions could support implementation
Rather than creating an entirely new institution, BeZero recommends using existing EU agencies and financial institutions wherever possible to administer the facility.
External specialists could support technical assessments, insurance and portfolio management, while public authorities would retain final responsibility for procurement decisions and oversight.
The report also calls for legislation to define transparent decision-making procedures, accountability arrangements and reporting obligations. These provisions would help establish how projects are assessed, how purchasing decisions are made and how the facility’s performance is monitored.
Beyond climate-related outcomes, BeZero recommends assessing the facility’s contribution to European competitiveness across its portfolio. This could include examining demand generated for European technologies, goods and services.
EU’s international carbon credit framework takes shape
The proposed procurement mechanism forms part of the EU’s wider climate policy framework for 2040. The European Climate Law provides for the possible use of high-quality international credits from 2036, subject to safeguards and further legislation. It also allows consideration of a pilot period between 2031 and 2035.
The European Commission’s proposal for the EU ETS review provides for up to 260 million allowances to be made available to finance purchases of an equivalent volume of international credits between 2036 and 2040. The proposed framework includes a safeguard under which the EU would retain a more ambitious domestic emissions-reduction trajectory if sufficient high-quality, high-integrity and cost-effective international credits are not available.
The detailed rules governing credit eligibility, procurement and oversight are therefore central to how the mechanism will operate. The Commission’s forthcoming legislative work is expected to address the framework for using international credits towards the EU’s 2040 climate target.
