Germany to freeze prices of emissions allowances for heating and transport

The German government plans to freeze the prices of national emissions allowances, which the country introduced several years ago for the heating and transport sectors. Germany’s national system is set to be replaced by the EU-wide EU ETS 2, but its launch has been postponed by a year. The government has spent months considering how to deal with the situation. It has ultimately decided to maintain the current price corridor of between 55 and 65 euros per tonne in 2027 as well.

In recent years, pricing emissions from heating and transport has become a major political issue, with some EU governments pushing to postpone or even scrap the European ETS 2 system. It was originally due to launch next year, but at the end of 2025, EU representatives agreed to delay it by a year. Some European countries have introduced their own charges on emissions from heating and transport, specifically Germany and Austria.

Prices have doubled in the system’s five years of operation

Germany launched its own system for pricing these emissions in 2021, when the price per tonne of CO2 started at 25 euros. In the following years, the price of emissions rose gradually, reaching a range of 55 to 65 euros per tonne. The German system was due to end at the end of this year, with the EU-wide system set to replace it from 2027. However, the one-year delay to EU ETS 2 complicated the German government’s plans, forcing it to consider how to respond.

According to Clean Energy Wire, representatives of Germany’s governing parties agreed at a recent meeting in Berlin that the price will remain unchanged next year. Households, small businesses and drivers can therefore expect the same financial burden from emissions next year.

Brigitte Knopf of the KlimaSozial think tank, who has previously helped shape climate policies, said the decision could jeopardize the country’s climate targets. Knopf also said, according to the outlet, that the government had initially expected allowance prices to rise to around 80 euros per tonne. Higher prices would put greater pressure on people to move away from fossil fuels. Lower prices, in turn, will mean lower revenue for Germany’s Climate and Transformation Fund, which relies on income from the sale of emissions allowances.

German households continue to favor fossil-fuel heating

Despite emissions charges for heating, German households continue to favor fossil fuels, especially natural gas, when replacing their heating systems. However, the share of heat pumps has been gradually increasing in recent years, and two years ago it had already come close to that of fossil-fuel alternatives.