Consumers in Germany are facing increasing costs for heating and transportation as the price of carbon dioxide (CO2) continues to rise. Introduced in 2021, the CO2 price is levied on fuels and is incrementally increasing, impacting prices at the pump and for home energy.
What is the CO2 Price?
The CO2 price applies to heating and fuels in Germany and has been gradually increasing since 2021. These costs are passed on to consumers, leading to higher prices for gasoline, diesel, natural gas, and heating oil. Currently, the price is legally mandated, but is expected to be determined by the EU emissions trading system in the future.
Companies that sell fuels like natural gas, heating oil, gasoline, and diesel are required to have emissions certificates, which they can trade with each other as needed. The number of available certificates decreases over time, aiming to incentivize more efficient climate protection measures.
Revenue generated from emissions trading goes into the Climate and Transformation Fund, intended to support the transition to a more climate-friendly economy. However, these funds are also being used to finance other costs, such as a state-subsidized lower industrial electricity price starting in January.
What Changes in 2026?
The CO2 price is set to increase from the current 55 euros per ton to between 55 and 65 euros per ton at the start of the new year. These certificates will be auctioned off, with the Umweltbundesamt scheduling the first auctions for July 2026, to be held weekly at the Leipzig Energy Exchange through October. Additional certificates, priced at 68 euros, may be purchased if demand isn’t met.
Originally, fuels like gasoline and natural gas were to be included in the European emissions trading system by 2027, allowing prices to be determined solely by supply and demand. However, this is now likely to be delayed until 2028, a decision reached by negotiators from the European Parliament and EU states, to avoid significant price increases for consumers.
What Prices Can Consumers Expect?
Drivers can expect to pay more at the pump. The ADAC estimates a price increase of nearly 3 cents per liter for gasoline and slightly less than 3 cents per liter for diesel in the coming year.
Heating costs will also rise, with the Verbraucherzentrale Bundesverband anticipating an increase of about 3 cents per liter for heating oil and 0.3 cents per kilowatt-hour for gas. A household with a gas heating system consuming around 20,000 kilowatt-hours annually could see heating costs increase by approximately 50 euros compared to the previous year.
What Should Tenants Be Aware Of?
For homes with central gas or oil heating systems, the CO2 price is split between landlords and tenants. The more energy-efficient a building is, the larger the share tenants will pay. In poorly insulated buildings with inefficient heating, landlords will bear a larger portion of the cost.
The Verbraucherzentrale advises that landlords must transparently disclose the CO2 price in utility bill statements. Tenants should request a correction if the energy consumption, CO2 costs, and allocation are unclear.
What Can We Expect in the Future?
The CO2 price is likely to continue increasing in the long term. Wambach, president of the Leibniz Center for European Economic Research in Mannheim, anticipates a rise of up to 200 euros per ton of CO2 by 2028. This could translate to an additional 60 cents per liter for gasoline and an increase of around 1,000 euros per year in heating costs for a four-person household using gas.
Researchers like Höhne from the New Climate Institute advocate for social compensation measures, as lower-income populations are disproportionately affected by high energy prices. The Verbraucherzentrale Bundesverband is urging the government to facilitate the transition from expensive fossil fuels to renewable energy sources, including maintaining existing regulations for heating system replacements and reducing overall energy consumption.
Frequently Asked Questions
What is the purpose of the CO2 price?
The CO2 price is intended to incentivize a reduction in carbon emissions and promote a transition to a more climate-friendly economy by making polluting fuels more expensive.
How is the CO2 price calculated?
The CO2 price is currently set by law, but will eventually be determined by the EU emissions trading system, where companies trade emissions certificates.
How does the CO2 price affect tenants?
The CO2 price is split between landlords and tenants for central heating systems, with the proportion each pays depending on the energy efficiency of the building.
As the cost of energy continues to evolve, how might individual consumers and policymakers best prepare for a future with a higher carbon price?
