TL;DR

Fit for 55 is the European Union's legislative package to cut net greenhouse gas emissions 55% by 2030 versus 1990 levels under Regulation (EU) 2021/1119, the European Climate Law. In February 2026, the European Parliament approved a binding 90% emissions cut for 2040, extending Fit for 55 into a two-decade compliance runway that now affects almost every enterprise selling into or sourcing from the EU.

Key Takeaways

• The European Climate Law (Regulation (EU) 2021/1119) makes a 55% net emissions reduction by 2030 and climate neutrality by 2050 legally binding across all 27 member states.

• The 2040 amendment agreed by Parliament and Council in December 2025 and ratified by Parliament in February 2026 adds a 90% net emissions reduction target for 2040, with up to 5% international carbon credits allowed from 2036 (European Parliament).

• CBAM's definitive period entered force on 1 January 2026; more than 4,100 authorised declarants had been registered in the first week of operations (European Commission).

• EU ETS2, covering fuels for buildings and road transport, has been postponed from 2027 to 2028 under the 2040 deal and will eventually cover approximately 11,400 regulated fuel suppliers.

• The EU Methane Regulation (Regulation (EU) 2024/1787) has been in force since August 2024 and now requires source-level monitoring, leak detection and repair within 30 days, and equivalent standards from non-EU gas exporters from January 2027.

Introduction

Net0 is an AI infrastructure company that builds AI solutions for governments and global enterprises, including an AI-powered sustainability platform that automates reporting across more than thirty regulatory frameworks. Fit for 55 is the single largest legislative package that platform is designed to handle: fifteen interlocking EU laws that together turn the European Climate Law into binding obligations for companies, importers, transport operators and building owners across the bloc. This 2026 guide explains what Fit for 55 contains, what has changed since the original 2021 proposal, and how enterprise teams are operationalising compliance now that CBAM is live and ETS2 is on the horizon.

What is the European Climate Law?

The European Climate Law is Regulation (EU) 2021/1119, adopted on 30 June 2021 and in force since 29 July 2021. It codifies two headline commitments from the European Green Deal: climate neutrality across the EU by 2050, and an intermediate net greenhouse gas reduction of at least 55% by 2030 versus 1990 levels. The law also establishes an indicative trajectory between these targets, requires the Commission to assess progress every five years in line with the Paris Agreement review cycle, and obliges member states to align national plans, budgets and policies with the long-term pathway.

The law created the European Scientific Advisory Board on Climate Change, hosted by the European Environment Agency, as an independent body of fifteen senior scientists that advises EU institutions on the adequacy of climate policy and intermediate targets. Its assessments directly informed the debate on the 2040 target and will continue to shape future reviews.

The 2040 target: a 90% cut becomes law

On 8 December 2025, negotiators from the European Parliament and Council reached provisional political agreement on a binding 2040 target of a 90% reduction in net greenhouse gas emissions versus 1990. Parliament ratified the deal on 5 February 2026 by 413 votes to 226 with 12 abstentions (European Parliament). The amendment inserts the 2040 target directly into the European Climate Law, places the EU on a linear pathway from the 55% 2030 milestone to net zero in 2050, and introduces three flexibilities that were central to the political deal:

• International credits: from 2036, up to 5% of the 2040 reduction can be met through high-quality international carbon credits that are compatible with the Paris Agreement, leaving an effective 85% domestic reduction requirement.

• Domestic permanent carbon removals: member states can use engineered and nature-based removals to compensate for hard-to-abate residual emissions.

• Cross-sector flexibility: enhanced flexibility within and between sectors is allowed so that member states can prioritise the most cost-effective abatement.

The agreement also moved the launch of ETS2 from 2027 to 2028 and locked in a two-year review cycle that will test the 2040 target against scientific advice and economic conditions. For enterprise compliance teams, the 2040 target matters because it extends the compliance horizon for every other Fit for 55 instrument and sharpens the bite of carbon pricing through the 2030s. It also raises the stakes for accurate long-range decarbonization planning tied to company-level science-based pathways.

The Fit for 55 package in detail

Fit for 55 is not one directive but a coordinated package of roughly fifteen legislative files, most of which have now been adopted and are in various stages of implementation. The diagram below maps the core instruments that sit under the European Climate Law, including the 2040 amendment that extends the compliance horizon to 2050.

The EU Emissions Trading System (EU ETS)

The EU ETS is the bloc's flagship carbon pricing mechanism, operating as a cap-and-trade system across the European Economic Area. It covers approximately 10,000 installations in power generation, energy-intensive industry, intra-EEA commercial aviation and, since 2024, maritime transport. The revised ETS adopted in 2023 tightened the sectoral emissions target to a 62% reduction by 2030 versus 2005 levels, accelerated the Linear Reduction Factor and introduced one-off rebasing of allowances to deliver that steeper trajectory. EU ETS allowances and verified emissions data have become one of the most important inputs to corporate GHG Protocol reporting and to Scope 1 disclosures under CSRD.

EU ETS2 for buildings, road transport and small industry

ETS2 is a separate emissions trading system established by the revised ETS Directive to cover fuels used in buildings, road transport and small industrial installations not captured by the main ETS. The scheme regulates upstream fuel suppliers rather than end users and is projected to cover around 11,400 companies across the EU (Energy Post). ETS2 was originally scheduled to start in 2027 but has been postponed to 2028 as part of the 2040 target agreement, with a contingency to delay a further year if energy prices remain exceptionally high. In February 2026 the Council adopted a targeted amendment to the Market Stability Reserve adding up to 80 million additional allowances per year through biannual top-ups to smooth the launch (Consilium). Monitoring obligations have already begun, with regulated entities required to submit monitoring plans and track fuel-attributed emissions ahead of the first surrender cycle.

The EU Carbon Border Adjustment Mechanism (CBAM)

CBAM is the EU's carbon border tariff, designed to neutralise the risk of carbon leakage by pricing the embedded emissions of imported goods at the same level as domestic production under the EU ETS. Introduced in 2023, CBAM transitioned through a reporting-only phase in 2023-2025 and entered its definitive period on 1 January 2026. From that date, importers of iron and steel, cement, fertilisers, aluminium, electricity and hydrogen must register as authorised CBAM declarants, report embedded emissions per consignment and surrender CBAM certificates on an annual basis. In the first week of January 2026 alone, more than 12,000 authorisation applications were submitted and over 4,100 declarants had received authorised status (European Commission); iron and steel accounted for 98% of covered import volumes. Full implementation requires supplier-level primary data from non-EU producers, which has made supplier emissions data one of the most operationally demanding parts of EU climate law for multinationals. For a deeper dive, see the Net0 guide to the EU Carbon Border Adjustment Mechanism.

The Modernisation Fund and the Innovation Fund

The Modernisation Fund channels revenues from EU ETS allowance auctions into the modernisation of energy systems and energy efficiency improvements in lower-income member states. The Innovation Fund uses the same revenue source to support large-scale demonstration of net-zero and low-carbon technologies, with successive calls through 2024 and 2025 awarding multi-billion euro grants to electrolysers, low-carbon cement, industrial heat pumps and CCS projects. Both funds are core instruments for aligning industrial transition capex with Fit for 55 targets and are increasingly referenced by corporates when they build a profitable decarbonisation strategy for their European operations.

The Social Climate Fund

The Social Climate Fund is the distributional complement to ETS2. It is financed from ETS2 revenues and a dedicated EU budget contribution, with a total envelope set at EUR 86.7 billion for 2026-2032 under the revised framework. It funds social climate plans developed by each member state to support vulnerable households, microenterprises and transport users affected by the pricing of buildings and road transport fuels. For enterprises, the Social Climate Fund matters because it is the political mechanism that keeps ETS2 politically viable through the 2030s.

Effort Sharing Regulation: sectors outside the EU ETS

The revised Effort Sharing Regulation (ESR) sets binding national targets for sectors not covered by EU ETS or ETS2, including agriculture, waste, smaller industrial installations and part of road and domestic maritime transport. The EU-wide target under the revised ESR is a 40% reduction by 2030 versus 2005 levels, with binding national trajectories ranging from 10% to 50%. ESR obligations flow into national energy and climate plans (NECPs), which in turn shape subsidy regimes, fleet rules and agricultural payments that enterprises depend on.

Land use, land use change and forestry (LULUCF)

The revised LULUCF Regulation entered force in May 2023 and raised the EU's binding net carbon sink target for 2030 to at least 310 million tonnes of CO2-equivalent net removals, with binding national targets for each member state. LULUCF is the accounting framework that determines how forests, croplands and wetlands contribute to the 55% 2030 and 90% 2040 headline goals. It also interacts with the nature restoration law and with corporate commitments on nature-based solutions.

CO2 standards for cars and vans

Regulation (EU) 2023/851 sets a phase-down of new-vehicle CO2 to zero emissions for new cars and vans sold in the EU from 2035. The interim performance standards remain:

• Cars: 93.6 g CO2/km for 2025-2029 and 49.5 g CO2/km for 2030-2034.

• Vans: 153.9 g CO2/km for 2025-2029 and 90.6 g CO2/km for 2030-2034.

A scheduled review in 2026 is examining the role of CO2-neutral fuels in vehicles registered after 2035, but the zero-emission headline target for new sales remains unchanged.

Methane emissions in the energy sector

Regulation (EU) 2024/1787 – the first EU-wide Methane Regulation for the energy sector – was adopted in June 2024 and entered into force on 4 August 2024 (EUR-Lex). It replaces what used to be a non-binding strategy and now imposes concrete obligations on oil, gas and coal operators, including:

• Source-level measurement of methane emissions and verification by independent accredited verifiers.

• Leak detection and repair surveys with all detected leaks repaired within five to thirty days depending on severity.

• A phased ban on routine venting and flaring, with venting from drainage stations banned by 2025 and from ventilation shafts by 2027, subject to safety exceptions.

• Import obligations that began in 2025 requiring EU importers to report methane data for third-country supplies, and from January 2027 require new import contracts to be concluded only with exporters that meet equivalent MRV standards.

The Commission will conduct its first review of the regulation in 2028.

ReFuelEU Aviation and FuelEU Maritime

ReFuelEU Aviation and FuelEU Maritime together decarbonise the two transport sectors that sit inside the EU ETS. ReFuelEU Aviation mandates a steadily rising blend of sustainable aviation fuels (SAF) at EU airports, starting at 2% in 2025 and rising to 70% by 2050, with a sub-target for synthetic e-fuels. FuelEU Maritime, adopted in July 2023, requires ships calling at EU ports to progressively reduce the greenhouse gas intensity of the energy they use on board by up to 80% by 2050 versus a 2020 baseline, with mandatory use of onshore power supply at major ports from 2030.

Alternative fuels infrastructure (AFIR)

The Alternative Fuels Infrastructure Regulation (AFIR), adopted in July 2023, is the deployment backbone for electric and hydrogen mobility. It requires fast-charging stations for cars every 60 km along the TEN-T core network, heavy-duty charging every 120 km, and hydrogen refuelling stations in all urban nodes and along core corridors from 2030. AFIR targets are binding on member states rather than on enterprises directly, but they define the pace at which corporate fleets can credibly electrify.

Renewable Energy Directive and Energy Efficiency Directive

The revised Renewable Energy Directive (RED III) raises the EU-level binding target to at least 42.5% renewable energy in final consumption by 2030, with an indicative stretch to 45%, replacing the earlier 32% goal. The revised Energy Efficiency Directive sets a binding EU-wide target to reduce final energy consumption by 11.7% by 2030 versus 2020 projections. Both directives flow into corporate obligations through energy audits, sub-metering requirements and public-sector renovation rates.

Energy Performance of Buildings Directive (EPBD)

The revised EPBD, adopted by the Council in April 2024, aims to make all new buildings zero-emission from 2030 and the entire EU building stock zero-emission by 2050. It introduces minimum energy performance standards, phases out stand-alone fossil boilers by 2040 and requires solar deployment on new commercial and public buildings. Asset-level energy and emissions data under EPBD is directly relevant to real-estate portfolios that also report under CSRD and ESG reporting frameworks.

Hydrogen and decarbonised gas package

The hydrogen and decarbonised gas market package, adopted in 2024, updates the EU's gas market rules to prioritise renewable and low-carbon gases. It sets uniform internal market rules for hydrogen, creates a regulated framework for dedicated hydrogen networks, introduces network planning obligations and strengthens consumer protection and security of supply.

Energy Taxation Directive revision

The proposal to revise the Energy Taxation Directive remains under negotiation in the Council. It aims to align tax treatment of energy products with their actual environmental and energy content, remove legacy exemptions for fossil aviation and maritime fuels, and give member states a consistent framework for carbon-aligned energy taxation. Adoption requires unanimity and has slipped repeatedly since the original 2021 proposal.

Compliance implications for enterprises

Fit for 55 is now the dominant force shaping enterprise climate data strategy in Europe. The table below summarises the data requirements created by the most operationally demanding components of the package.

Three patterns stand out. First, the package is MRV-heavy: every major instrument requires verified, auditable measurement, reporting and verification of specific data points. Second, it is supply-chain deep: CBAM and the Methane Regulation both extend obligations beyond EU borders to cover imported goods and imported energy, which forces multinationals to extract and validate Scope 3 emissions data from non-EU suppliers. Third, it is multi-framework: the same underlying data powers EU ETS surrender, CBAM declarations, CSRD sustainability statements and ESG reporting, which is why the companies that move fastest are those that consolidate their data architecture once rather than building one pipeline per regulation. The decision-making framework for decarbonization initiatives is a useful starting point for prioritising which Fit for 55 exposures to address first.

How Net0 supports Fit for 55 compliance

Net0's AI-powered sustainability platform automates the collection, validation and reporting of the data that Fit for 55 now demands from enterprises. The platform connects to more than 10,000 source systems, applies 50,000+ emission factors, and generates outputs across more than thirty sustainability reporting frameworks, including EU ETS, CBAM, CSRD/ESRS, IFRS S2, SBTi and the GHG Protocol. Three platform capabilities map directly onto Fit for 55 pain points:

• Automated supplier data collection for CBAM: the platform ingests supplier-level primary emissions data, validates against CBAM methodology and produces certificate-ready quarterly declarations.

• ETS and ETS2 data consolidation: installation-level and fuel-level emissions are consolidated in a single verified ledger ready for annual surrender and for CSRD Scope 1/2/3 alignment.

• Scenario modelling to the 2030, 2040 and 2050 pathway: Marginal Abatement Cost Curve analysis and scenario tools test abatement portfolios against the 55%, 90% and net-zero targets set by the European Climate Law, supporting a credible profitable decarbonisation strategy.

Net0's sustainability work sits inside a broader AI infrastructure used by governments and global enterprises, meaning Fit for 55 data flows can be deployed in sovereign and hybrid environments where EU data residency is a procurement requirement.

Book a demo to see how Net0 operationalises Fit for 55 compliance for enterprises and government clients.

FAQ

What is Fit for 55?

Fit for 55 is the European Union's legislative package to cut net greenhouse gas emissions by at least 55% by 2030 versus 1990, as required by Regulation (EU) 2021/1119, the European Climate Law. It comprises roughly fifteen interconnected laws covering carbon pricing, energy, transport, buildings, land use and a social fund.

What is the European Climate Law's 2040 target?

In February 2026 the European Parliament approved a binding 2040 target of a 90% reduction in net greenhouse gas emissions versus 1990 levels. The amendment allows up to 5% international carbon credits from 2036, the use of domestic permanent removals and enhanced cross-sector flexibility.

When does EU ETS2 start?

ETS2, which covers fuels for buildings, road transport and small industrial installations, will become fully operational in 2028 after being postponed from its original 2027 date as part of the 2040 target deal. Monitoring and reporting obligations are already in force ahead of the first surrender cycle.

Is CBAM in force in 2026?

Yes. The Carbon Border Adjustment Mechanism entered its definitive period on 1 January 2026. Importers of iron and steel, cement, fertilisers, aluminium, electricity and hydrogen must now register as authorised CBAM declarants and surrender CBAM certificates for the embedded emissions of their imports.

How does Fit for 55 affect non-EU companies?

Non-EU companies are affected primarily through CBAM, which prices the embedded emissions of exports to the EU, and through the Methane Regulation, which from January 2027 requires new gas, oil and coal import contracts to meet EU-equivalent MRV standards. Non-EU suppliers also face indirect pressure via CSRD value-chain disclosures required of their EU customers.

What data do enterprises need to comply with Fit for 55?

Enterprises need installation-level Scope 1 data for EU ETS, fuel-attributed emissions for ETS2, embedded emissions per import consignment for CBAM, source-level methane measurements for energy operators, and asset-level building and transport emissions for sectoral rules. The same base data also supports CSRD and GHG Protocol reporting.

How can AI help with Fit for 55 compliance?

AI-based sustainability platforms like Net0's automate data extraction from enterprise systems and suppliers, validate emissions against regulatory methodologies, generate audit-ready disclosures for EU ETS, CBAM, CSRD and related frameworks, and model long-range abatement portfolios against the 2030, 2040 and 2050 climate law targets.