Incentives for fewer CO2 - carbon dioxide emissions

CO2 - carbon dioxide has its price Incentives for fewer CO2 - carbon dioxide emissions

As of 2021, the German Federal Government will introduce CO2 - carbon dioxide pricing for the heating and transport sectors. Via national CO2 - carbon dioxide emissions trading, greenhouse gases emitted from heating and transport will have their price. The Federal Government will reinvest the income from CO2 - carbon dioxide pricing in climate protection measures or as financial relief for citizens.

National emissions trading

Companies that trade in heating oil, natural gas, petrol and diesel will have to pay a CO2 price for these products as of 2021. They will be obliged to purchase pollution rights in the form of certificates for the greenhouse gas emissions that their products produce. This will take place via the new national emissions trading system. It has been set up by the Federal Government to complement the European emissions trading system, which already applies to the energy industry, energy-intensive industry and air traffic within Europe – and is successfully contributing to reducing emissions. Emitting CO2 is now set to have a price in the transport and heating sectors. Scientific reports consider this the most cost-effective way, in terms of national economy, to reduce emissions and achieve climate goals.

Fixed price per tonne of CO2

The national emissions trading system (nEHS) will launch in 2021 with a fixed price per tonne of CO2. The German Emissions Trading Authority (DEHSt) at the Federal Environment Agency sells certificates to companies that bring heating and vehicle fuels into circulation.
A law is currently being debated in parliament which is set to raise the prices in the emissions trading system before its launch on 1 January 2021. The initial CO2 price per tonne will be €25 as of January 2021. After that, the price will gradually rise to €55 in 2025. A price corridor of at least €55 and a maximum of €65 will apply for 2026.

Following this introductory phase, the pollution rights will be sold by auction. The overall number of certificates for CO2 will be limited in line with the climate goals. The price will then be determined on the market by supply and demand.

The Federal Government is beginning moderately to avoid too great a financial burden on citizens and companies. This will allow them to react to future price developments in the medium term, buy environmentally-friendly products or invest in environmentally-friendly systems. A reliable pricing pathway will allow them to plan ahead with confidence.

Climate protection incentives

To date, there has been no effective price signal for heating and transport which reflects CO2 intensity from the consumption of fossil heating and vehicle fuels, as the European emissions trading system does not apply to these sectors.

The new CO2 price will make heating and transport that are damaging to the environment more expensive in future, providing incentives to switch to climate-friendly technologies such as heat pumps and electromobility, to save energy, and to use renewable energies.

Comprehensive CO2 pricing also creates incentives for innovation and developing new technologies. When emissions become more expensive, climate-neutral products and business models will be able to assert themselves on global markets. Research and innovation play a major role in the Federal Government’s plans to invest now in the climate-neutral world of tomorrow.

Financial relief for citizens

The Federal Government will invest the additional income in implementing the measures of the Climate Action Programme 2030 – such as climate-friendly transport and energy-efficient buildings. It will also give back part of this income to citizens in the form of relief from higher costs – for example by lowering the Renewable Energies Act (Erneuerbare-Energien-Gesetz, EEG) surcharge, and thus electricity prices, increasing the commuting allowance for taxpayers, and granting a mobility bonus.

Overall outlook for Europe

Germany and France both support the introduction of the CO2 price within the framework of European emissions trading and are working to expand CO2 pricing to all sectors.