The draft, seen by Reuters, said the European Union executive would propose a legally-binding target to cut net greenhouse gas emissions by 90% by 2040, from 1990 levels - with the aim of keeping the EU on course for its core climate aim to reach net zero emissions by 2050.

But following pressure from governments including France, Germany, Italy, Poland and the Czech Republic, the draft EU proposal includes flexibilities that would soften the 90% emissions target for European industries.

Previous EU emissions targets have been based entirely on domestic emissions cuts.

Reflecting Germany's public stance, up to 3 percentage points of the 2040 target can be covered by carbon credits bought from other countries through a U.N.-backed market, the draft said, reducing the effort required by domestic industries.

The carbon credits would be phased in from 2036, and the EU will propose legislation "setting robust and high integrity criteria and standards, and conditions on origin, timing and use of such credits," the draft said.

Countries would also get more flexibility on choosing which sectors in their economy contribute most towards the 2040 goal, it said.

Climate change has made Europe the world's fastest warming continent and a heatwave this week has caused wildfires and disruption across the continent, but Europe's ambitious policies to combat temperature rise have stoked tensions within the 27-member bloc.

While the European Commission has pitched its climate agenda as a way to improve Europe's competitiveness and security, some governments and lawmakers say industries reeling from U.S. tariffs and high energy costs cannot afford tougher emissions rules.

"Decarbonisation is not only crucial for the planet, but also a key driver of economic growth when integrated with industrial, competition, and trade policies," the draft said.

A Commission spokesperson declined to comment on the draft, which could change before it is published.

Carbon credits are generated by projects that reduce CO2 emissions abroad - for example, forest restoration in Brazil, and raise funds for such projects. However, investigations have shown some credits failed to deliver the environmental benefits they claimed.

The EU's climate science advisers have opposed counting them towards the 2040 target, and said spending money on foreign carbon credits would divert investments from local industries.

EU countries and lawmakers must negotiate and approve the 2040 goal. That lawmaking process can take years, but the EU faces a deadline of mid-September to submit a new 2035 climate target to the U.N. - which the Commission has said should be derived from the 2040 goal.