High-latitude frozen soils contain a vast store of organic matter, a potential source of greenhouse gases due to permafrost thaw. Understanding natural carbon cycle responses to climate change is crucial for emission reduction strategies. We use the Max Planck Institute Earth System Model, driven by the Adaptive Emission Reduction Approach (AERA) and accounting for the impact of frozen soil carbon (FSC), to assess emission pathways and remaining emissions budgets for limiting global warming to 2°C and 3°C relative to preindustrial levels. We found that thawing FSC adds 122 PgC under 2°C and 229 PgC under 3°C warming, available for decomposition in active layer, with about 75% reaching the atmosphere as carbon-dioxide by 2300. Emission pathways that include the release of FSC diverge from their respective reference simulations without permafrost by the middle and end of the current century. By 2300, remaining budgets are reduced by ~13% (115 PgC) for 2°C and ~11% (156 PgC) for 3°C stabilization levels. Annual permafrost emissions average ~0.7 PgC/yr for 3°C and ~0.3 PgC/yr for 2°C scenarios. However, temporary emission peaks reaching half of present-day annual fossil fuel emissions (~5 PgC) are possible. Surprisingly, while negative emissions are required for both reference simulations, only the simulation for the 3°C warming, accounting for FSC, requires negative fossil fuel emissions. This occurs because the FSC release causes an earlier initiation of emission reduction by AERA, resulting in a smoother emission curve. These findings underscore the importance of factoring in permafrost thaw in mitigation action.